The move higher would represent a 65% upside for the stock, which closed up 0.43% to $1,823.28 on Friday.
"We have a high degree of confidence that AMZN shares can reach this level with no major acquisitions or other significant changes to the business. A potential AWS spin-off, however, would, no doubt, help to highlight the relatively low valuation of the other segments," analyst Michael Olson wrote.
Piper Jaffray used a two-pronged strategy to evaluate Amazon's valuation, a traditional brick-and-mortar multiple for the company's core retail business and a discounted e-commerce multiple.
"The difference between applying the B&M multiple to core retail vs. using the e-commerce multiple is significant, resulting in a ~$500B disparity in valuation. We believe Amazon core retail should be valued more closely to the Ecom multiple and, therefore, see significant upside potential," Olson wrote.
The firm estimated that Amazon's advertising segment revenue will grow 26% year over year in 2020 vs. a comparative average of 17% growth. Meanwhile, cloud revenue from Amazon Web Services is expected to grow 31% in 2020.
Amazon is a holding in Jim Cramer's Action Alerts PLUS charitable trust.