Key Points

Amazon's average analyst price target stands near $313, about 34 percent above current trading levels.
The stock trades roughly 16 percent below its 52-week high after another decline on Thursday.
The company is set to report second-quarter results on Thursday, July 30.

Amazon (NASDAQ: AMZN) is scheduled to report second-quarter results on Thursday, July 30. It enters the report in an unusual spot. The market continues to sell shares while Wall Street maintains that the company is worth considerably more.

Shares dropped about 4.6 percent on Thursday to $233.66 despite no new company news. The stock now sits roughly 16 percent below its 52-week high of $278.56.

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Yet the average analyst price target sits near $313 as of this writing, roughly 34 percent above the current price, and the consensus rating among analysts remains a strong buy.

A gap that wide four days before earnings deserves attention. Does it signal that the stock is a bargain heading into the report?

Image source: Amazon.

Why the stock keeps sliding

The selling pressure does not stem from weak results. It centers on spending levels and the timeline before returns appear.

Amazon plans to invest about $200 billion in capital expenditures in 2026, with most directed toward AI infrastructure.

That figure weighs on the stock, and the impact is already clear. 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 increase in capital spending.

This past week renewed the concern. Alphabet raised its own 2026 capital spending forecast to as much as $205 billion when it reported second-quarter results, and its shares declined. Amazon fell with the group on Thursday, while a reported Senate investigation into alleged Chinese influence over its marketplace added some company-specific pressure the same day. Still, the AI spending outlook remains the main concern tied to the report. If Alphabet's budget can keep rising, investors can reasonably expect Amazon's to rise as well.

What the Street is looking at

Of course, analysts view the same company but focus on different evidence. The clearest element is Amazon Web Services, the company's cloud computing business.

AWS revenue rose 28 percent year over year in the first quarter to $37.6 billion. The trajectory matters more than any single rate. AWS grew 20 percent in the third quarter of 2025, 24 percent in the fourth quarter, and 28 percent in the first quarter of 2026. That marks three straight quarters of acceleration, exactly what investors hope to see from a company investing heavily in capacity.

AWS is growing 28 percent (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 percent 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 percent to 19 percent.

In other words, the price targets rest on three quarters of measurable acceleration. That trend, more than anything else, explains where the average sits.

So which side is right?

Ultimately, the underlying business looks strong and shares appear undervalued.

Of course, risks remain. If Amazon raises its capital spending plan significantly, the market's first reaction could be another decline, even if the core business continues to grow nicely.

But for long-term investors, the setup here looks favorable. A good deal of fear already appears priced in at 16 percent below the high. And what the spending is actually producing, an accelerating AWS, is the kind of evidence that justifies the outlay. So as long as this acceleration continues, the outlook on the stock remains positive.

Should you buy stock in Amazon right now?

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.