Amazon bulls slash price targets but call out strong second half setup
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Amazon (NASDAQ:AMZN) traded lower after the e-commerce giant delivered guidance below expectations as it pointed to unique growth and cost challenges around the pandemic and war in Ukraine.
In reaction, Amazon (AMZN) bulls across Wall Street lowered their estimates on the e-commerce giant and dropped price targets from their lofty levels to account for the lower-than-anticipated sales and operating income guidance issued on Thursday.
Firms lowering their price targets included Deutsche Bank (cut to $3,500 from $4,100), BMO Capital Markets (cut to $3,450 from $3,650), Telsey Advisory Group (cut to $3,400 from $3,850), Susquehanna (cut to $3,800 from $5,000), Wedbush Securities (cut to $3,500 from $3,950), Raymond James (cut to $3,300 from $3,950), Truist Securities (cut to $3,500 from $4,000) and Morgan Stanley (cut to $4,200 from $3,800).
Despite the PT reductions, all the firms kept Buy-equivalent ratings on Amazon (AMZN) in place on positive long-term views. William Blair noted that inflation and inefficiencies pressure margins as Amazon lapped higher demand. The firm said costs and investment spending should normalize. The view from Raymond James was that while some of the AMZN headwinds may take longer to solve, the reacceleration/margin thesis into the second half remains where the Q2 guidance seems to contemplate all possible headwinds. Morgan Stanley noted that consumer demand is still very strong for Amazon and looks to a profitable back half of the year.
Shares of Amazon (AMZN) fell 8.83% in premarket action on Friday to $2,636.62.
Dig into the Amazon earnings call transcript.