Amazon Shares Decline by 12% as Concerns Arise, According to J.P. Morgan Analyst
Since mid-September, Amazon (NASDAQ:AMZN) shares have experienced a 12% decline, raising concerns among investors. J.P. Morgan analyst Doug Anmuth identifies several factors contributing to this decline, including slowing third-party data, the state of the US consumer and retail market, increased competition, rising fuel costs, the magnitude of holiday hiring, and an ongoing FTC lawsuit.
However, Anmuth provides reassurance for each of these concerns. He believes that AWS growth will be supported by various factors such as optimization moderation, new workload deployments, and favorable year-over-year comparisons in the third and fourth quarters. Additionally, he expects Gen AI to serve as a catalyst for future AWS growth.
Regarding the consumer issue, Anmuth acknowledges fluctuating trends and market softness but highlights Amazon’s targeted initiatives, such as same-day/1-day delivery and increased spending by Prime members, as potential drivers of growth despite the challenging retail landscape.
While competition from TikTok, Temu, and SHEIN is expanding globally, Anmuth suggests that Amazon is primarily at risk in the low-end market segment, as it generally targets a broad consumer base.
Anmuth addresses the surge in fuel costs by noting that Amazon has secured fixed prices for a portion of its fuel procurement and benefits from volume-based discounts.
Regarding the concern over holiday hiring costs, Anmuth sees the addition of 250,000 seasonal workers in the US as a positive sign for fourth-quarter demand.
Lastly, Anmuth expresses confidence in Amazon’s ability to overcome the FTC lawsuit. He believes it will be challenging for the FTC to prove that Amazon illegally maintains monopoly power, inflates prices, degrades quality, or stifles innovation. Instead, he argues that Amazon has advanced e-commerce to higher levels of innovation and service.
Overall, Anmuth maintains his positive outlook on Amazon and recommends investors to take advantage of the recent share price decline.
According to Anmuth, AMZN shares are rated as Overweight (Buy), with a $180 price target, suggesting a potential growth of approximately 42% in the coming months. This target aligns closely with the Street’s average target of $176.02, implying a 38% gain over the next year. With only one skeptic among 40 recent reviews, the consensus view on Amazon stock remains a Strong Buy.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended for informational purposes only, and it is crucial to conduct your own analysis before making any investment decisions.