According to analysts at investment bank Baird, higher costs and a focus on growth are likely to weigh on Amazon stocks going in profit. But they said any weakness in the stock price is just an opportunity to buy.
Rising input costs are likely to be a major theme in the earnings season, Baird’s Colin Sebastian and Dalton Kern said Tuesday, as they lowered Amazon operating profit estimates for the current quarter and 2022.
The e-commerce giant and leader in cloud services for commercial customers faces increased costs related to labor, logistics and transportation, product costs and technology infrastructure, the analysts said. This is likely to put pressure on the stock.
“While we hoped Amazon’s impressive service revenue growth would boost investor sentiment before the end of the year, there appear to be enough macro headwinds and legitimate cost concerns to hold back stocks in the near term.” , said Sebastian and Kern. . “We would be buyers for weakness.”
Baird’s team cut its estimated revenue to $7.6 billion for the fourth quarter of 2021, compared to analyst consensus estimates of $8.1 billion and $40 billion for 2022, compared to consensus expectations of $42.6 billion.
“We assume Amazon will remain focused on growing and expanding global services, which will require higher ‘initial’ labor costs, transportation and logistics costs (including fuel and equipment inflation), product costs and technology (servers, chips and network equipment, etc.). ),” the analysts said.
The short-term effects result in no change in Baird’s optimistic medium- and long-term outlook for Amazon stocks, which traded around $3,270 on Wednesday. The analysts have a price target for the stock of $4,000, which represents a 23% upside potential.
(ticker: AMZN) shares were up 0.9% on Wednesday afternoon. It is up 0.6% so far this year.
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