Brent Thill, an analyst at Jefferies, made a compelling case for Amazon (AMZN) stock ahead of the company's earnings report this week. His argument is straightforward: Amazon's stock is trading cheaply, and most investors are missing it.

The Valuation Disconnect

According to Thill, Amazon currently trades at 13 times next-twelve-month enterprise value to EBITDA. It means that investors are paying significantly less for Amazon's profits than they have historically.

The discount is striking. Amazon trades six turns below its 10-year average and a full eight turns below Walmart, according to Thill's analysis. For a company with Amazon's growth profile and multiple revenue streams, that's unusual.

"We think that's too cheap at the early stage of AWS re-acceleration," Thill wrote in his note to clients. The stock trades at a 25% discount compared to major internet peers. That's a meaningful gap for a company that dominates e-commerce, leads in cloud computing, and continues to expand into advertising and other high-margin businesses.

AWS Is Ready to Accelerate

The biggest catalyst Thill sees is Amazon Web Services (AWS). The server juggernaut generated $33 billion in revenue last quarter, growing 20.2% year-over-year (YoY). That marked the fastest growth rate in 11 quarters and represented a 270-basis-point acceleration from the prior quarter.

But Thill believes the real story is just beginning. He points to three specific drivers that could push AWS backlog growth into the mid-20s percentage range or higher in the fourth quarter.

• First, AWS faces its easiest YoY comparison in the fourth quarter of 2025.
• Second, October bookings alone surpassed the entire third quarter's deal volume. That includes a massive $38 billion contract with OpenAI that wasn't even reflected in the third quarter backlog of $200 billion.
• Third, industry checks across the board indicate bullish sentiment toward cloud spending. Companies want to run their AI workloads on AWS because of its superior functionality, security, and operational performance, according to Amazon CEO Andy Jassy.

The momentum is real. AWS added more than 3.8 gigawatts of power capacity in the past year, more than any other cloud provider. The company expects to double its 2022 power capacity again by 2027.

Strong Consumer Business Holds Up

While AWS grabs headlines, Amazon's core retail business continues to perform well. The company delivered its fastest speeds ever for Prime members in the third quarter, expanded same-day delivery to over 1,000 U.S. cities, and is rolling out three-hour delivery in select markets.

Thill's checks reportedly showed "solid ecomm performance, robust cloud strength, and logistics efficiency improvements." The firm views fourth-quarter EBIT expectations of roughly $26 billion as reasonable.

Amazon's advertising business also accelerated for the third consecutive quarter, generating $17.6 billion in revenue and growing 22% YoY. The company exceeded its own expectations for upfront advertising commitments around Prime Video live sports.

Amazon's grocery push is gaining serious traction:

• It now allows customers in more than 1,000 cities to order perishable groceries with same-day delivery.
• When customers start buying fresh groceries from Amazon, they visit the site more often and return twice as frequently as non-perishable shoppers.
• This matters because it changes shopping habits.
• Amazon is converting weekly grocery stock-up trips into multiple smaller orders per week, creating more touchpoints with customers and more opportunities to sell additional products.

Amazon's AI investments are translating into tangible customer engagement. Rufus, the company's AI shopping assistant, has reached 250 million active customers this year. Monthly users jumped 140% YoY, while interactions surged 210%.

More importantly, customers using Rufus during a shopping trip are 60% more likely to complete a purchase. Rufus is on track to deliver over $10 billion in incremental annualized sales.

Is AMZN Stock Undervalued?

Jefferies sees 25% upside in AMZN stock based on a sum-of-the-parts valuation. The firm maintained its “Buy” rating and $300 price target.

That AMZN stock price target implies significant appreciation from current levels. For a company generating $180 billion in quarterly revenue and $17.4 billion in operating income (excluding one-time charges), the current valuation looks attractive.

Amazon spent $89.9 billion on capital expenditures through the first three quarters of 2025, primarily for AWS infrastructure to support AI and core cloud services. The tech giant expects full-year CapEx of approximately $125 billion and plans to increase that amount in 2026.

Those investments are paying off. AWS revenue increased $2.1 billion quarter-over-quarter and now runs at a $132 billion annualized rate. Operating income for AWS was $11.4 billion in the third quarter.

Out of the 57 analysts covering AMZN stock, 50 recommend “Strong Buy,” five recommend “Moderate Buy,” and two recommend “Hold.” The average Amazon stock price target is $297.67, above the current price of $243. 

Amazon faces execution risks like any company, and the stock could remain volatile. But Thill's analysis highlights a compelling opportunity for investors willing to look past short-term noise.

The combination of AWS reacceleration, improving retail margins, and advertising growth creates multiple paths to upside. Trading at a significant discount to peers and its own historical average, AMZN stock looks undervalued heading into what could be a strong earnings report.

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