Why Amazon Stock Reminds Wedbush's Devitt of Google

Key Concepts

• AWP (Amazon Web Services) Growth: A key metric indicating the growth rate of Amazon's cloud computing division.
• Operating Income Normalization: Adjustments made to reported operating income to account for one-time items, providing a clearer picture of underlying performance.
• Entropic Contribution: The expected increased contribution from the "entropic" business (likely referring to a specific segment or initiative within Amazon) to overall growth.
• Upward Trajectory in Growth Rate: A projected increase in the rate of growth for Amazon's business segments, particularly looking towards 2026.
• "Next Google Trade": A comparison suggesting Amazon is poised for a significant re-rating and acceleration in its core business, similar to a past period of strong performance and multiple expansion for Google.
• Compressed Multiples: A situation where a company's stock valuation (price-to-earnings ratio, etc.) is lower than its historical average or industry peers, often indicating investor skepticism or underappreciation.

Amazon's Financial Performance and Growth Outlook

The discussion centers on Amazon's recent financial quarter, highlighting it as one of the "cleanest" the company has experienced in a considerable period. While the reported numbers are strong, there were certain "normalizations" related to operating income due to one-time items. After adjusting for these, Amazon not only met but "moderately beat" revenue expectations.

The most significant takeaway from the quarter was the 20% growth in AWP (Amazon Web Services). This robust growth is crucial because it signals an anticipated "bigger contribution from entropic in the depressed business as well." This suggests that a previously underperforming or less significant segment of Amazon's business is expected to start contributing more meaningfully to overall growth.

Future Growth Trajectory and Stock Valuation

The transcript posits an "upward trajectory in terms of growth rate going into 2026." This projected acceleration in growth has been identified as a primary factor that has "held the stock back" previously. The implication is that investors have been hesitant to assign a higher valuation to Amazon due to concerns about its growth rate.

The "Next Google Trade" Analogy

A compelling argument is made that Amazon is "on the verge of Amazon kind of becoming that next Google trade that happened in 2025." This analogy suggests a scenario where a company, previously "somewhat left for dead" with "multiples compressed," is now at the "beginning of an acceleration in the core business." This implies a potential for significant stock price appreciation as the market recognizes and re-values the company's renewed growth prospects.

Key Arguments and Supporting Evidence

• Argument: Amazon's latest quarter shows a significant improvement in financial health.
  • Evidence: Described as the "cleanest quarter this company has had in some time," with adjusted operating income beating expectations.
• Argument: AWP growth is a critical indicator of future performance.
  • Evidence: Reported 20% AWP growth, which is expected to drive increased contributions from other business segments.
• Argument: Amazon is poised for a period of accelerated growth.
  • Evidence: Projection of an "upward trajectory in terms of growth rate going into 2026."
• Argument: The stock is undervalued and could experience a significant re-rating.
  • Evidence: Comparison to the "next Google trade," where a company with compressed multiples begins to accelerate its core business, leading to a re-evaluation by the market.

Conclusion

The transcript suggests that Amazon has delivered a strong financial quarter, with particular emphasis on the 20% growth in AWS. This growth, coupled with the expected contribution from other business segments, points towards an accelerating growth trajectory into 2026. The current market sentiment, characterized by compressed multiples, is seen as an opportunity, potentially positioning Amazon for a significant re-rating akin to a past "Google trade" as its core business acceleration becomes evident.