Amazon.com is experiencing a decline in its stock price, down 15% since mid-September, for various reasons. Concerns regarding consumer spending weakness, rising fuel prices impacting delivery costs, intensifying online shopping competition, and a recent Federal Trade Commission lawsuit accusing Amazon of operating an illegal monopoly in the market have all contributed to the stock’s decline. Additionally, investors are worried about rising costs due to Amazon’s plan to hire 250,000 seasonal workers. Furthermore, there are uncertainties related to the strength of cloud computing demand and the emergence of new competitors, such as Nvidia, who are planning to build cloud data centers to compete with Amazon Web Services. Despite these challenges, analysts believe that investors should take advantage of the recent weakness in Amazon’s shares ahead of earnings.
Mizuho analyst James Lee maintains a Buy rating and a target price of $180 on Amazon shares, considering stable demand for Amazon Web Services (AWS) services and the expectation of accelerating AWS demand in the coming year. Lee believes that interest-rate volatility will not impact strategic decisions on shifting computing capacity to the cloud, as customers are reinvesting recent savings on cloud spending optimization projects into new areas. J.P. Morgan analyst Doug Anmuth echoes this sentiment, stating that concerns about AWS growth rate are unwarranted, as there are indications of moderating optimizations, new workload deployment, and easing year-over-year comparisons. Anmuth also expresses confidence in Amazon’s retail growth, driven by same-day delivery, increased Prime member spending, and a strong selection of third-party sellers. He sees Amazon’s aggressive holiday hiring plan as a sign of strength in the business. Furthermore, Anmuth believes that the FTC will struggle to prove its case against Amazon, as he believes the company has advanced e-commerce through innovation, adoption, and improved service levels.
In conclusion, despite concerns surrounding Amazon.com, analysts are optimistic about the company’s future prospects. They anticipate stable demand for AWS services, expect the cloud service to benefit from new workload deployment and an easing of year-over-year comparisons, and believe that Amazon’s retail growth will be supported by same-day delivery, increased Prime member spending, and a wide selection of sellers. Additionally, analysts do not anticipate the Federal Trade Commission’s lawsuit to significantly impact Amazon’s business. As a result, they recommend taking advantage of the recent decline in Amazon’s stock price.
