Shares of Amazon ( AMZN ) opened down nearly 10% on Feb. 6, after a slight profit miss and puzzling capital expenditure (capex) guidance spooked investors, despite an otherwise upbeat fourth-quarter report.

The Nasdaq-listed company now plans to spend about $200 billion this year, mostly on artificial intelligence (AI) infrastructure. That number is miles ahead of the roughly $146 billion that analysts were expecting.

This surprise triggered a strong sell-off that pushed AMZN’s Relative Strength Index (RSI) to 20, indicating deeply oversold conditions.

Compared to its year-to-date high, Amazon shares are now down just under 20%.

It makes sense to treat this post-earnings weakness as a buying opportunity given that AMZN generated cloud revenue, a springboard that many believe can single-handedly trigger a multi-year rally in its stock price.

At $35.58 billion, Amazon Web Services not only beat estimates; blew them away in the fourth quarter, reinforcing that the company isn’t spending blindly on AI. Their investments are already generating returns.

More importantly, the Seattle-based company “has the potential to achieve more cloud capacity than any of its major rivals in the next two years,” Bernstein analyst Mark Shmulik told clients in a recent report. This makes AMZN stock even more attractive as a long-term holding.

Amazon is worth owning because of the strength of its high-margin advertising business, which brought in $21.32 billion in the fourth quarter.

In addition, the company’s custom chips are experiencing triple-digit growth, according to CEO Andy Jassy, ​​helping to cut costs and capture AI spending that would otherwise go to Nvidia (NVDA).

What’s also worth mentioning is that despite a 40% year-over-year increase in AWS’s portfolio to $244 billion, Amazon’s stock trades for less than 30 times forward earnings.

That makes them relatively inexpensive than some of the other “Magnificent 7” names like Apple (AAPL) and Nvidia.

Investors should also note that Wall Street remains bullish on AMZN stock after its fourth-quarter print.

Amazon’s consensus rating is at a “Moderate Buy,” with an average target of about $298 indicating a potential upside of nearly 50% from here.

This article was created with the support of automated content tools from our partners at Sigma.AI. Together, our financial data and AI solutions help us deliver more informed stock market analysis to readers faster than ever before.

As of the date of publication, Wajeeh Khan had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com