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Amazon Post-Earnings: What Wall Street Is Saying

After the last earnings release, analysts almost unanimously downgraded their price targets for Amazon stock. Yet almost every single one of them remains bullish.

Amazon’s  (AMZN) - Get Amazon.com Inc. Report most recent earnings report revealed a weak first quarter in 2022. Every single top investment firm in Wall Street was forced to revisit its projections for the company’s net sales — mostly for the company's e-commerce segment.

Before the first quarter (Q1) 2022 earnings disclosure, TipRanks presented an average price target of $4,160 for Amazon stock, with forecasts ranging from $3,000 to $5,000. After the release, the average fell to $3,750, with estimates varying between $2,900 and $4,655.

Today, let's compare what the Amazon bears and bulls are saying.

Figure 1: Amazon Post-Earnings: What Wall Street Is Saying

Figure 1: Amazon Post-Earnings: What Wall Street Is Saying

(Read more from Amazon Maven: Amazon Stock: Should You Buy It In May?)

The Bears

D.A. Davidson’s Tom Forte lowered his price target on Amazon from $3,900 to $3,125. He believes the growth run-up of the e-commerce segments might have ended. He wrote, "With slowing e-commerce sales growth, the company needs new revenue sources to sustain its elevated revenue growth and premium valuation multiple, in our view beyond its AWS effort, which continues to impress."

Even more bearish is Rosenblatt Securities’ Barton Crockett. The analyst, who had previously rated Amazon as a “hold,” has decreased his price target from $3,000 to $2,900. He had already been arguing that an rising inflation would trim Amazon’s profitability and affect the company’s revenue projections for the long term.

The Bulls

Bank of America remains bullish on the e-commerce behemoth, despite reducing its price target from $4,225 to $3,770. Analyst Justin Post argues the extra $4 billion cost pressures should be “manageable,” as the company should also see a “significant” expansion in profit margins from 2023 to 2025 coming from its cloud, advertising, and third-party marketplace.

Cowen & Co.’s John Blackledge has an even bolder thesis. The analyst believes Amazon has plenty of pricing power when it comes to Prime membership. Blackledge thinks the company should consider raising fees to offset its losses in the e-commerce segment.

"Think about what they have added since 2018," Blackledge explained. "All of the Prime video original content. They are adding NFL exclusive breaks for Thursday night football. They just won MGM. That's just on Prime video. They doubled their fulfillment network and delivery speeds, and are getting faster. So they have added so much in the last four years."

The Verdict

Amazon bulls and Amazon bears have some things in common. None of them disregards how inflationary costs have hammered Amazon’s e-commerce profitability or how much AWS remains a cash-generating machine for the company.

In summary: E-commerce is bad, everything else is good. And of the 32 analysts covering the stock, 31 of them rate it as a “buy,” with only one "hold" recommendation.

So the real question does not seem to be whether investors should buy or sell their AMZN shares. The conundrum is how much of Amazon’s streams of revenues are able to support its e-commerce segments during these inflationary times? And how does this translate to the company’s valuation?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)