Experts Clash on Amazon’s (AMZN) Outlook

Two guests on Schwab Network had very different views of Amazon (AMZN) stock today. “Alarm bells” are ringing for AMZN, said Ron Westfall, Research Director of The Futurum Group.

Amazon is “undervalued” because of the strength of its cloud business, AWS, countered Chris McMahon, CEO of Aquinas Wealth. McMahon has a $280 price target on AMZN.

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Westfall’s Bearish Take on AMZN

Many of the “alarm bells” ringing for AMZN relate to “macro factors,” according to Westfall. Both Walmart (WMT) and Delta (DAL) recently reported that consumer spending was softening, he noted.

Moreover, Amazon’s first-quarter fulfillment guidance came in slightly below expectations. And with U.S. tariffs being raised on China, AMZN is likely to take a significant hit from the latter development, since 25% of the products that the tech giant sells are made in the Asian country, he stated.

Finally, AMZN’s cloud business is likely to be hurt as companies become more cautious due to macro factors, Westfall warned.

McMahon’s Bullish Take on AMZN

AWS generates $100 billion of annual revenue and is growing at a 20% annual clip, McMahon noted. Further, amid high inflation, AMZN can benefit from consumers’ search for value, according to the investor. And finally, AMZN’s retail business is outperforming Walmart (WMT) and Costco (COST), he said.

While we acknowledge the potential of AMZN, 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 more promising than AMZN but that 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.