Hold AMZN? Why this analyst lowered his price target

2022 has not been kind to Amazon (AMZN) – Get the report from Amazon.com Inc. shareholders. However, Wall Street analysts are almost unanimous in the idea that the e-commerce giant will emerge stronger from the current economic crisis.

Yes, I wrote “almost”.

Barton Crockett of Rosenblatt Securities is an exception to the rule. The analyst recommended investors “hold” their shares in April, priced at $3,000, or $150 after the split. And although the analyst maintained its neutral rating, it recently lowered its valuation to $107.

Here’s why Crockett changed his mind.

Figure 1: Hold AMZN? Why This Analyst Lowered His Price Target

(Learn more about Amazon Maven: Amazon E-commerce: more losses to come)

E-commerce: always the reason to sell

Crockett’s pessimistic predictions could turn into reality: Amazon is not resilient to the inflationary environment. Its investment thesis suggested that the e-commerce juggernaut lacks pricing power over consumers due to the natural competitiveness of the retail industry.

“We continue to view the long-term consensus sales estimate as too high, primarily due to what we consider to be excessive long-term optimism for online retail,” Crockett said. “Amazon’s extraordinary multi-year outperformance in retail has declined significantly. We expect this to continue.”

The bad news got worse when the US Census Bureau reported that in the fourth quarter of 2021, e-commerce sales had returned to their pre-pandemic market share of 12.9%, compared to 15.7% in second quarter of 2020 – just after the start of the first confinements.

Since competitors – such as walmart (WMT) – Get the report from Walmart Inc. and Target (TGT) – Get the target company report – hold better positions in the physical retail space, sales that would have been online could have ended up happening offline, due to the shift in consumer behavior towards pre-pandemic patterns.

AWS: always the reason to buy

Crockett, however, remains bullish on AWS, Amazon’s cloud computing business. The cloud arm was responsible for generating $6.5 billion in operating profit in the first quarter of 2022, bringing the company’s consolidated operating profit to a total of $3.7 billion.

“Other elements of Amazon remain secular, including AWS. Progress toward retail maturity and heightened macro risks prompt us to reduce multiple long-term assumptions, thereby lowering our price target,” he said. added the analyst.

Always Sell + Always Buy = Always Hold

Rosenblatt’s overall thesis hasn’t changed much from April to June, except for the extension of his projections for the e-commerce titan: “Our projection for total Amazon sales in 2Q22E is in line with guidance and the FactSet consensus. But our 3Q22E, 4Q22E, 2023E and 2024E are 3% to 6% lower.”

Ultimately, Crockett believes Amazon’s e-commerce growth will hardly outpace the broader U.S. retail sector, as Prime Day’s move from Q2 to Q3 in 2021 will skew comparisons. .

Yet the macro scenario remains the primary concern. Crockett believes inflationary pressures on Amazon’s profitability will persist longer than overall market projections.

(Disclaimer: This is not investment advice. The author may own one or more stocks mentioned in this report. Additionally, the article may contain affiliate links. These partnerships do not do not influence editorial content. Thank you for supporting Amazon Maven)

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