AMZN Named Top Pick at Morgan Stanley, Sees Long AWS & Agentic AI Runway

Sam (0:00)

We're back with Morning Trade Live. Let's focus on the one year chart for Amazon. Shares are down nearly 10% from the all time high, reached on August the 3rd, but still up over 20% year over year. So some good, some bad, particularly for these Mag 7 stocks, which really recently reestablished market leadership here. We've been bouncing around over the last few weeks as we have come off the highs, as we mentioned just coming out of the summer. Amazon was the subject of Morgan Stanley's note this morning, so that is the focus of the morning trade. Joining us for a closer look is Marley Kayden, host of Trading 360 and my co-host, of course, on Market on Close. Good morning. Hope you had a great weekend, Marley. Just walk us through the Morgan Stanley note.

Marley Kayden (0:39)

Good morning to you, Sam. I hope the same. Morgan Stanley coming in with a very strong note for Amazon today. Adding to that gain you were just talking about, they're up more than 3.5 percent this morning. After getting a price target hike at Morgan Stanley, they upped the target to 350, up from 335 That implies about a 40 percent upside from where this dot closed on Friday. But more importantly than that, and likely the larger reason that we're seeing the big move to the upside for Amazon, is that it's also named top pick status. Top picks are reserved for an analyst single highest conviction idea, as opposed to just a routine target revision here. So the analyst really seeing some major potential upside, and saying that it's poised to get a considerable boost from a combination of catalysts. Five of them are named in the note, AWS growth, AWS margin beats, greater visibility into bedrock, Amazon's role in agentic shopping, and robotics. The analyst saying he now expects AWS revenue to grow 47 percent in 2027, and 42 percent in 2028 That's up from 41 percent and 37 percent, after NVIDIA indicated that AWS expects to deploy 2 million GPUs over that two-year span. The analyst also said that investors are under appreciating the impact of Amazon Web Services on their business and their shares. He said that AWS will contribute to the company's revenue, especially as it gains more visibility into artificial intelligence focused cloud service. That's bedrock. That other catalyst he cited. On the AI front, he said, quote, Amazon is a key agentic enabler and winner, and that remains unchanged even through the launch of Muse. He said they expect Amazon to lever to leading e-commerce infrastructure and loyal user base to continue to monetize. And it's not just about agentic shopping either, Sam. They also say that Amazon is positioned to become a physical AI winner.

Saying, quote, the extent to which we see Amazon's robotics fulfillment centers ramp, new builds and retrofits through 27 could showcase how Amazon is a physical AI winner. So really positive note here, multiple catalysts mentioned.

Anything tied to AI right now we know is very important to the conversation. And saying, not only will they be a winner on the agentic front, but also on the physical front, likely a part of this boost. Even just since I've been talking, we're now up more than 3.8%.

And Amazon, of course, has its earnings coming up on the 29th, Sam.

Sam (3:05)

Yeah, and we'll be unpacking all of that as far as what it's going to say around CapEx. But yeah, great summary. And obviously it is the outperformer as far as the Mag 7 are concerned today. So certainly winning on the day off the back of this. Marley, appreciate it. Thanks so much for that. I'll talk to you later in the day.

Let's trade the name now with Charles Moon, stock strategist over at Prosper Trading Academy. Good morning, Charles. Just walk us through your example trade on this name.

Charles Moon (3:27)

Yeah, so with the way that the market has been moving, especially with the recent volatility, you know, it's hard to really pick a direction. So why pick a direction? Let the market do the work for us. I'm looking at the 1026 strangle on the 262 half calls, 250 puts, because if Amazon does break out above the 50 SMA, they could rally pretty nicely as high as 264, perhaps even higher because these hyperscalers with recent price target bumps have been moving nicely. And more importantly, we could also see investors piling in in anticipation of our earnings break. But if the market keeps breaking down the way it has with the velocity, especially with Amazon breaking down below 253, that could really bring, in my opinion, some trouble. And Amazon could spill very quickly all the way down to 245