Wall Street's Average Amazon Price Target Sits 34% Above the Stock -- 4 Days Before Its Earnings.

Amazon (NASDAQ: AMZN) reports second-quarter results on Thursday, July 30. It heads into that report in a strange position. The market keeps selling the stock, and Wall Street keeps insisting it's worth far more.

Shares fell about 4.6% on Thursday to $233.66, even though Amazon itself reported nothing. The stock now sits about 16% below its 52-week high of $278.56.

Yet the average analyst price target is about $313 as of this writing (roughly 34% above the current price), and the consensus rating among analysts is a strong buy.

A gap that wide, four days before earnings, is worth understanding. Does it mean the stock is a bargain going into the report?

Image source: Amazon.

Why the stock keeps sliding

The selling isn't about weak results. It's about spending, and about how long the bill keeps growing before the payoff shows up.

Amazon plans to invest about $200 billion in capital expenditures in 2026, most of it aimed at AI (artificial intelligence) infrastructure.

That figure hangs over the stock, and the bill is already visible. The company's trailing-12-month free cash flow fell to $1.2 billion as of the first quarter, down from $25.9 billion a year earlier, driven by a $59.3 billion year-over-year jump in capital spending.

This past week made the fear fresh again. Alphabet raised its own 2026 capital spending forecast to as much as $205 billion when it reported second-quarter results, and its own shares fell. Amazon fell with the group on Thursday -- and a reported Senate investigation into alleged Chinese influence over its marketplace may have added some company-specific pressure the same day. Still, the AI bill is the fear with the report attached to it. If Alphabet's budget can keep climbing, investors can reasonably brace for Amazon's to climb, too.

What the Street is looking at

Of course, the analysts are looking at the same company and seeing different evidence. The clearest piece of it is Amazon Web Services (AWS), the company's cloud computing business.

AWS revenue rose 28% year over year in the first quarter to $37.6 billion. And the trajectory matters more than any single rate. AWS grew 20% in the third quarter of 2025, 24% in the fourth quarter, and 28% in the first quarter of 2026. That's three straight quarters of acceleration, exactly what investors should hope to see from a company spending this much on capacity.

"AWS is growing 28% (our fastest growth in 15 quarters) on a very large base," CEO Andy Jassy said in the company's first-quarter earnings release.

The rest of the first quarter held up as well. Total net sales rose 17% year over year to $181.5 billion, and operating income climbed to $23.9 billion from $18.4 billion a year earlier. For the second quarter, management guided for net sales of $194 billion to $199 billion, which would represent growth of 16% to 19%.

In other words, the price targets have three quarters of measurable acceleration behind them. That trend, more than anything else, is why the average sits where it does.

So which side is right?

Ultimately, I think the underlying business looks great and that shares are undervalued.

Of course, there are risks. If Amazon lifts its capital spending plan significantly, the market's first reaction could be another leg down, even if the underlying business is growing nicely.

But for long-term investors, I think the setup here looks good. A lot of fear already looks priced in at 16% below the high. And what the spending is actually producing (an accelerating AWS) is the kind of evidence I'd want to justify the spending. So as long as this acceleration persists, I'll probably still be bullish on the stock.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.