Amazon (AMZN), which announced its first quarter loss since 2015, has seen its share price fall to its lowest level in over a year. This was due to ongoing downward pressure on financial markets and Amazon’s announcement of its quarterly loss.
Amazon reported a slowdown of online sales and a decrease in the value its stake in Rivian (RIVN) electric vehicle manufacturer. Amazon’s operating income missed Wall Street estimates and warned that it will be affected by headwinds, such as “continued inflationary and supply chain stress” in the second quarter.
Is Amazon stock a good buy, sell or hold?
This article will examine the most recent predictions for Amazon stock.
Amazon announces mixed Q1 results
Amazon was able to benefit from the rapid growth of ecommerce during and after the Covid-19 pandemic. Amazon reported that its operating income decreased to $3.7 billion in the first quarter 2022, as compared to $8.9bn for the same period 2021.
The net loss for the company was $3.8bn or $7.56 per share. This compares to a net income $8.1bn or $15.79 per share a year ago. This included a pretax valuation loss of $7.6bn from Rivian (RIVN) that was included in the company’s non-operating expenses.
Andy Jassy, Amazon CEO, stated that the pandemic in Ukraine and the subsequent war in Ukraine brought about unusual growth and challenges.
“Consumer business has increased 23% annually over two years, with remarkable growth in 2020 at 39% year over year. This necessitated us to double the size of the fulfilment network we’d built over Amazon’s first 25 years. And all this in 24 months.
“Today, we are no longer looking for staff or physical capacity. Our teams are now focused on increasing productivity and cost efficiency throughout our fulfilment network.”
Company reported an increase of 36.6% in net sales year-on-year from Amazon Web Services (AWS), to $18.44bn. This is due to the shift in customers who have moved their operations onto cloud networks. AWS operating income increased by 56.6% to $6.5bn, year-on-year.
Amazon prepares to split its stock
Amazon filed a statement to the US Securities and Exchange Commission (SEC), on 9 March. It stated that the board of directors approved a 20-for-1 stock split. This was the first stock split since the dotcom boom.
Each common stockholder who holds a share on or before 3 June will be entitled to 19 shares, subject to approval from shareholders. The trading of Amazon shares on Nasdaq will begin on a split-adjusted base on 6 June.
The board also approved a plan to allow the company to repurchase stock up to $10bn “opportunistically” from time to time if it feels that this would increase long-term shareholder value.
The expiration date of the authorisation is not fixed. The company may buy back shares through “one or more open-market transactions, privately negotiated transactions or transactions structured through investment banks institutions, or any combination thereof”.
This authorization replaces the previous $5bn buyback program that was approved by Amazon in 2016. Under this plan, Amazon purchased $2.12bn worth of its shares.
Analysts speculated about whether Amazon would do a stock split following the announcement by Alphabet (GOOGL) in February that its parent company would be splitting its stock in July. Stock splits were announced by Tesla (TSLA), and Apple (AAPL).
Although a stock split doesn’t directly impact the Amazon share price, it does make shares more affordable for retail investors who might not be able purchase fractional shares through their brokerage.
Employees of companies also have more control over their stock-based compensation.
Stanislas Capital noted:
Analysts have suggested that Amazon could integrate the Dow Jones Industrial Index by lowering its share price. It would also force passive investment funds (funds that track the index) to buy company stock and increase company valuation.
Is Amazon’s share price slump a buying opportunity or a selling risk?
Amazon’s (AMZN), share value dropped by nearly 35% year to date (YTD) from just over $3,400 to the $2,200 level. This is its lowest point in two years.
In January, the stock fell to $2,700. It rebounded above $3,200 in February, but the Russian invasion of Ukraine caused a stock market sell-off and brought the AMZN price down below $2,900. On 29 March, the price recovered to $3,386. However, it began to decline again in April.
In response to the earnings release, Amazon’s stock price fell from $2,891 (28 April) to $2,485 on the following day. The stock price has continued to fall, reaching $2,173 on 10 May.
Technical analysis of the stock showed that the price of AMZN shares was trading below its 10- and 20-day moving mean (MAs) at the time this article was written (10 May). This indicates a bear trend. The asset’s relative strength index (RSI), reading 22 suggests that it is undervalued.
What’s your opinion on AMZN?
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Amazon stock forecast 2022 and beyond: Will AMZN ever increase?
“We see Amazon as a top choice on a 12-month perspective with an increasing positive skew in the risk/reward.”
By Goldman Sachs
What are the prospects for the stock after Amazon’s earnings update? And what are the expectations of analysts for the future stock price at Amazon?
According to MarketBeat data, the average Amazon stock price forecast by 38 Wall Street analysts who have given a rating was $3817.44 at the time MarketBeat wrote this article (10 May).
According to consensus, there was a significant upside to the current level. The estimates ranged from a low of $2800 to a high point of $4,655. The stock was rated as a buy by 35 of the 38 rating agencies. There were also two sell recommendations and one hold recommendation.
MarketBeat data revealed that at least 19 investment banks and companies reduced their Amazon stock projections following the earnings report.
Deutsche Bank Research analysts wrote that while the earnings week was not pleasant, they believe there is some nuance investors should be focusing on as they look at the remainder of the year and consider potential dislocations.
“Amazon maintained a more positive tone about the consumer’s health throughout 2022. AMZN’s less discretionary mix, higher-income consumer and power of Prime subscription will all support fundamentals on an relative basis.
We believe that the first step in finding an incremental buyer to e-commerce stocks is when the numbers have reset to low enough levels to establish a benchmark in 2H22.
Goldman Sachs analysts revised their Amazon stock price target for 12 months, but they remain positive about the long-term outlook.
We expect the stock will trade in the same trading range as before these cost narratives are taken up by the market. They wrote that the catalyst path for the future will consist of better-than-expected growth (given investor concerns over post-pandemic Ecommerce Normalisation and macroeconomic headwinds), and/or forward management commentary on 2H’22 (2nd half of 2022) which can show a pronounced margin ramp compared to 1H’22 (1st half of 2022), in a client note dated 29 April.
We continue to consider Amazon a top pick in a 12-month perspective with an increasing positive skew of its risk/reward following further de-rating after this earnings report. To reflect the 2022 headwinds, we reiterate our Buy rating and adjust our estimates to lower our PT from $3,700 to $4,000, while maintaining our Buy rating.
Jefferies analysts reduced their Amazon share price projection from $4,000 to $2,700 but stated that they see a path to second-half outperformance driven by an improved profit trajectory, continued AWS momentum, and a better profit trajectory.
J.P. Morgan analysts stated that investors should “buy” the pullback because AMZN can overcome incremental cost pressures in the coming quarters. The analysts at J.P. Morgan reiterated their AMZN stock analysis as overweight, but they decreased their price target of December 2022 to $4,500 from $4,000.
Algorithm-based forecasting services can give long-term targets for price, even though analysts are not known to do so. Wallet Investor provided a bullish forecast for Amazon as of the writing of this article (10 May). The stock is expected to trade at $2,663.508, $3,247.416 and $3,837.699 respectively by 2024.
The stock could rise to $4,426.744 by 2025 and $5,235.75 within five years.
CoinPriceForecast projected a price target of $3,224 at the end 2022 and $3.794 at the end 2023. The stock could reach $4.267 at the end 2025, and $5.767 at the end 2030, according to the forecast.
It is important to remember that stock market volatility can make setting a long-term price target difficult. Algorithm-based forecasters and analysts can make mistakes.
Are Amazon shares a good investment?
Before investing in any stock or asset, we recommend doing your own research to ensure that it is the right fit for your investment portfolio. Before making an investment decision, you should look at the market trends, news and technical analysis. Remember that past performance does not guarantee future results. Never invest money you can’t afford to lose.
Amazon (AMZN) and any other stock are a good investment. It all depends on your risk tolerance, how much you plan to invest, and other factors.
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