Amazon Shares Decline by 12% as Concerns Mount, but Analyst Remains Bullish
Since reaching a yearly peak in mid-September, Amazon (NASDAQ:AMZN) shares have seen a decline of 12%. This drop has been accompanied by several concerns, including AWS growth, the state of the US consumer and retail, increased competition, rising fuel costs, the magnitude of holiday hiring, and the FTC lawsuit.
However, J.P. Morgan analyst Doug Anmuth has addressed each of these concerns with optimism. Regarding AWS growth, Anmuth points to factors such as moderation of optimizations, new workload deployments, and easing year-over-year comparisons in the later part of the third quarter and fourth quarter. He also believes that Gen AI will play a significant role in driving AWS growth starting next year.
On 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 in a challenging retail landscape.
While competition from platforms like TikTok, Temu, and SHEIN is expanding globally, Anmuth suggests that Amazon is primarily at risk at the low-end and continues to target a broad consumer base.
Addressing the surge in fuel costs, Anmuth notes that Amazon has secured fixed prices for a portion of its fuel procurement and benefits from discounts based on volume and throughput.
Regarding holiday hiring, Anmuth sees the addition of 250,000 seasonal workers in the US as a bullish sign for fourth-quarter demand.
As for the FTC lawsuit, Anmuth believes that it will be challenging for the FTC to prove that Amazon illegally maintains monopoly power. He argues that Amazon has actually advanced e-commerce to higher levels of innovation, adoption, and service.
Overall, Anmuth maintains his positive outlook on Amazon and recommends investors to buy the pullback in shares. He rates AMZN shares as Overweight with a $180 price target, suggesting potential growth of approximately 42% in the coming months.
The consensus view among analysts aligns with Anmuth’s target, with a Street average target of $176.02, implying a gain of around 38% over the next year. The majority of recent reviews are positive, making the consensus view a Strong Buy.
Please note that the opinions expressed in this article are solely those of the featured analysts and should not be considered as investment advice. It is important to conduct your own analysis before making any investment decisions.