Amazon’s Q3 results have failed to put the market at ease. The company’s North America and International segments, largely representative of Amazon’s e-commerce business, missed revenue and op profit estimates due to (1) consumption patterns leaning towards brick-and-mortar stores and (2) a pandemic-related shortage of workers. As a result, Wall Street has dropped its price targets.
The better news is that not a single analyst has turned outright bearish on Amazon stock (AMZN) - Get Amazon.com, Inc. Report. In fact, the lowest price target on the Street still points at 9% upside opportunity, while the average target suggests gains of around 20% ahead.
Below, we dig deeper into some of Wall Street’s post-earnings reports and explain why experts continue to see decent upside potential in the stock.
(Read more from the Amazon Maven: How Amazon Stock Can Build Momentum Again)
Lower targets, still bullish
On the “less bullish” side of the equation, Barclays’ Ross Sandler has lowered his price target on Amazon to $3,800 from $4,130. The analyst noticed that Amazon’s revenues and operating profit were 1% and 12% below consensus, respectively, but both still met buy-side expectations.
Mr. Sandler also believes that Amazon might take advantage of its capacity and well-developed supply infrastructure to gain market share during the holidays – which, to be clear, should come with “hefty cost inflation”. Also, the analyst thinks that the cycle of downward estimate revisions should have run its course by now.
Piper Sandler’s Thomas Champion sees the stock rising to $3,875, down from $3,904 before earnings. Mr. Champion recognized that Amazon has margin challenges and difficult comps in the last quarter of 2021. Wolfe Research’s Deepak Mathivaan seems to agree, as the analyst also de-risked his price target on the stock to $3,800 from $3,850.
Goldman Sachs’ Eric Sheridan, despite having lowered his price to $4,100 from $4,250, stated that Amazon’s Q4 guide was “much better than feared”. He thinks that the company is well positioned to meet consumer demand, despite supply chain disruptions.
Mr. Sheridan also believes that Amazon’s disappointing profits in the short term will eventually be justified by its strategic moves that increases the company’s chances of capturing e-commerce market share in the long haul.
JPMorgan’s Doug Amnuth and Credit Suisse’s Stephen Ju have gone further. Both analysts have raised their price targets to $4,350 from $4,100 and to $4,200 from $4,100, respectively. Mr. Ju argues that Amazon’s inventory days are at their highest for the holidays, suggesting that the company should do better than competitors in the near term.
Finally, at the most bullish end of the spectrum, Stifel’s Scott Devitt expects Amazon stock to be "a big outperformer in 2022”. The analyst maintained his target at $4,400, as he believes that the recent selloff is an "attractive buying opportunity". The Amazon Maven has already offered its take on a buy-the-dip approach, which we think makes sense for long-term shareholders.
(Read more from the Amazon Maven: Amazon Stock: Should You Buy In November?)
Amazon Maven’s take
It seems that most analysts still see Amazon as the ultimate e-commerce and cloud titan. Despite having lowered price targets, not a single analyst is bearish in the long term. That said, tough 2020 comps and margin pressures could still weigh on the stock in the immediate future.
Wall Street still sees 20% upside potential in Amazon stock, even after unimpressive Q2 and Q3 results, and not a single analyst is bearish. Do you agree?
Get more expert analysis on AMZN
It’s never too early (or late) to start growing your investment portfolio. Join the Real Money community for just $7.50/month and unlock expert advice from our team of 30+ investing pros.
(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)