Morgan Stanley cut its price target for Amazon (AMZN) - Get Amazon.com, Inc. Report 4.7%, to $4,100 from $4,300, predicting that the online-retail major's hiring binge and wage increases for its logistics staff will hurt profit.
“Our analysis of AMZN’s 700,000 person U.S. logistics workforce and rising wages reveals more profit pressure ahead, as we lower our 2021/2022 earnings-before-interest forecast by 16%-19%,” wrote Morgan Stanley analyst Brian Nowak.
He kept his rating at overweight.
Seattle-based Amazon recently traded at $3,345, down 2.3%. It has gained 12% over the past six months.
“On Sept. 14, AMZN announced it plans to hire an additional 125,000 fulfillment and transportation workers and that it has increased its average starting wage in the U.S. to more than $18/hour, with a sign-on bonus of $3,000 (in select locations) and comprehensive benefits,” Nowak wrote.
“This marks the third announcement of higher U.S. base wages this year, following the April 29 announcement that more than 500,000 employees would see an increase between 50 cents and $3 an hour and the May 13 announcement that AMZN was hiring 75,000 employees across fulfillment and transportation with average starting pay of $17 an hour.
“AMZN’s growing logistics workforce is set to enable more e-commerce share gains, faster ship speeds (one-day and same-day) and new business opportunities (like third party logistics).
"But the cost of labor is rising.”