Analyst Mark Mahaney from Evercore ISI believes that Amazon.com Inc. has the potential to seize opportunities and reignite revenue growth despite a projected slowdown in its North American retail business. Mahaney presents his "Triple Trough Thesis" to support his bullish view on Amazon's stock.

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Mahaney suggests that the current growth rate of Amazon's retail business is dampened by the overall softness in consumer discretionary spending. While he expects the company's retail revenue to grow by 10% this year, compared to 13% last year, he anticipates an acceleration in North American Retail revenue growth with an improvement in macroeconomic trends.

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Furthermore, Mahaney highlights the potential for significant revenue benefits as Amazon continues to enhance its shipping times. He emphasizes that faster shipping leads to greater demand, which could drive revenue growth.

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In terms of the cloud-computing segment, Mahaney acknowledges the potential for a more pronounced slowdown in the near term, projecting a revenue increase of only 10% or 11% in the second quarter and 16% for the entirety of 2023, compared to 29% in 2022. However, he also envisions an opportunity for Amazon to trigger a growth inflection after the second quarter. Factors contributing to this growth include easier comparisons, traction in artificial intelligence workloads, and a relaxation of optimization efforts such as discounts and bundled renewals.

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Mahaney's bullish case also considers Amazon's valuation, noting that the stock is trading at a relatively low multiple. While the current enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple is 11, close to its five-year low of 10, it is significantly below its five-year high of 18. Mahaney suggests that if Amazon demonstrates recovery in operating margins and successfully reaccelerates revenue growth, the multiple could increase.

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Finally, Mahaney sees the probability that Amazon is at a trough margin, particularly after reporting a negative operating margin for its North American retail business last year. He acknowledges the challenges faced due to surging costs but notes that trends turned positive in the first quarter. Mahaney envisions a path for Amazon to achieve 5% operating margins for the segment as the headwinds ease and the company benefits from improved capacity utilization.

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Mahaney rates Amazon shares as outperform with a target price of $150. So far this year, the stock has already risen by 37%.

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