Amazon’s (AMZN) Longer-Term Outlook Is “Very Good,” Wedbush Says

While Amazon (AMZN) would likely be hurt in the short term by a deceleration of U.S. consumer spending, the longer-term outlook of AMZN stock is “very good,” Wedbush Managing Director, Equity Research Scott Devitt told Schwab Network recently.

Further, Devitt suggested that the shares are significantly undervalued.

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Amazon’s Longer-Term, Positive Catalysts

The tech giant’s retail business is gaining market share globally, excluding China, while its advertising business is expanding at an annual rate of 15% to 20%. Moreover, its cloud unit, AWS, generates $100 billion of sales annually and should grow at a compound annual rate of 20% over the next five years, Devitt believes.

“The setup for the stock is very good in the intermediate to long term,” he contended.

AMZN Stock Is “Underappreciated,” Devitt Said

Noting that AMZN has a significantly lower valuation than Walmart (WMT) and Costco (COST), Devitt said that Amazon’s “whole business is underappreciated.” He pointed out that Amazon’s retail business is expanding at a faster rate than that of WMT and COST.

“Amazon is mispriced in comparison with the companies it competes with,” said Devitt. Referring to AMZN’s current valuation versus its peers as “nonsensical,” he suggested that the latter situation would change eventually.

Devitt has a $280 price target and an Outperform rating on the shares.

While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is as promising as AMZN but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: The author owns shares of AMZN but has no intention of trading them in the next 48 hours. This article is originally published at Insider Monkey.