Amazon's stock has basically priced in elevated inflation and a potential recession, Jefferies long-time tech analyst Brent Thill says, meaning that it's an attractive investment.

Shares of the tech giant have plunged 30% so far in 2022 as investors fret over whether higher interest rates and a potential recession will hammer the e-commerce company's profits. Amazon's stock is the third worst-performer within the closely watched FAANG (Facebook, Amazon, Apple, Netflix, Google) complex, outperforming the stunning 60% declines of Meta and Netflix.

"We believe Amazon's current stock price already embeds headwinds from a recession/cost inflation and expect the market to attribute greater value to core-retail over time as cost headwinds are addressed and profitability expands," Thill wrote in a new note.

Here's more intel from Thill's new note to clients on Amazon:

• Price Target: $165 (reiterated)

• Rating: Buy (reiterated)

• Stock price movement assumed: +42%

Amazon is having a second Prime Day this month, and it could be a big sales tailwind for the retailer ahead of the crucial holiday shopping season.

"Our JefData proprietary survey of ~1,000 U.S. adults on 8/31 showed 82% of Prime subs would participate in a 2nd savings event this year, which is up from 59% for Prime Day. Additionally, 85% of participants who plan to participate in the 2nd event plan to spend over $50, which is up from 80% who spent >$50 on Prime Day. We estimate Amazon could generate $6.1 billion/$4.1 billion in gross merchandise value/Net Sales, which is a 3%/3% tailwind to 4Q22 Net Sales/gross merchandise value growth."

The financial impact of this second Prime Day —and Amazon's leadership position in retail — is likely being overlooked in the valuation of Amazon's core retail business.

"We estimate Amazon's non-retail businesses are worth a combined ~$1.3 trillion by applying peer-based growth-adjusted 2023 EV/ EBITDA multiples of 30x to Amazon Web Services ($938 billion), 20x to Advertising ($366 billion), and 10x to Subscription Services ($40 billion). Our sum-of-the-parts valuation implies the current valuation is ascribing virtually zero value to Core-Retail, resulting in a $29/share free option at Amazon's current price as the stock already embeds meaningful headwinds from a recession/ cost inflation, which limits downside and creates an attractive risk-reward."