Nasdaq AMZN Amazon
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Facing a Tough Environment, Is Amazon Tougher?
The world’s largest online retailer is set to release its quarterly and upcoming earnings after-hours on Thursday, February 3, and the situation may not be as rosy as usual. Although Amazon.com, Inc. (AMZN) may appear to have the world’s ecommerce shoppers in its clutches, the company is not immune to even larger macroeconomic factors.
Meanwhile, the latest market and tech selloff has not been kind to AMZN, as observed in the Amazon price chart on TipRanks.
Publishing his hypothesis on the issue is Michael Pachter of Wedbush Securities, who wrote that despite the supply and labor challenges faced by the company over the recent holiday shopping season, AMZN is poised to expand its overall profitability and gross margins. Among its more successful endeavors are Amazon Web Services, fulfillment by Amazon, and its advertising business.
Pachter rated the stock a Buy, and assigned a price target of $3,950. This target suggests a possible 12-month upside of 42.22%.
Despite its dominating vertical integration, Amazon can only operate at the capacity granted by ongoing supply constraints and a difficult short-term labor environment. However, the company has been investing heavily in its independence from third-party logistical players, by increasing its localized warehouse footprint, leasing ships and planes, and even manufacturing its own shipping containers.
The latter of those is particularly significant in the current market, as Pachter explained. “Shipping containers surged from under $2,000 before the pandemic to over $20,000 with multi-week delays.”
This kind of absurd price inflation necessitates Amazon's taking matters into its own hands, and increasing the supply of the containers themselves. Pachter mentioned that despite Amazon's costly investments into taking greater control over its deliveries, about 30% of Amazon’s own packages still rely on outside delivery services.
In addition to shipping costs, wage inflation has impacted Amazon, and continues to accelerate.
Next Thursday, the analyst expects “gloomy year-end results.” Nonetheless, he understands the company is in healthy standing and a possible unimpressive earnings report will mostly stem from shorter-term headwinds.
On TipRanks, the analyst rating consensus on AMZN is a Strong Buy, based on 30 Buy ratings. The average Amazon price target is $4,150.83, indicating a possible 12-month upside of 49.45%. AMZN closed trading Wednesday at a price of $2,777.45 per share.
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