- Analysts lowered their price targets on Amazon.com Inc AMZN following the Q3 earnings miss and weak Q4 outlook.
- Telsey Advisory Group analyst Joseph Feldman maintained an Outperform and lowered the PT from $4,000 to $3,850, implying an 11.7% upside.
- Piper Sandler analyst Thomas Champion lowered the PT to $3,875 from $3,904, implying a 12.4% upside, and reiterated an Overweight.
- Champion notes that Amazon's results were slightly weaker than expected, with Q3 revenue missing Piper's estimate by 30 basis points.
- The analyst said that subscription services and online stores drove most of the miss while Web Services growth accelerated to 39% year-over-year from 37% in Q2.
- He adds that management guided down Q4 growth and margins on challenging year-over-year comparables and supply chain issues.
- Barclays analyst Ross Sandler lowered the PT to $3,800 from $4,130, implying a 10.3% upside, and affirmed an Overweight.
- Sandler notes that the company reported revenue and operating income 1% and 12% below consensus and guided below, but mainly in line with buy-side expectations.
- Amazon sounds very confident around its capacity and supply chain advantages heading into the holidays, so there could be market share gains, but this preparation comes with "hefty cost inflation," says the analyst.
- However, Sandler thinks this could be the last of downward estimate revisions "for a while."
- JMP Securities analyst Ronald Josey lowered the PT to $4,000 from $4,500, implying a 16.1% upside, but maintained an Outperform.
- The company's earnings miss was driven by tough comps, labor inflation, and temporary network inefficiencies, the analyst notes.
- Josey further states, however, that he sees wage increases as a one-time step-up and other costs as more temporary, recommending that investors take advantage of any significant pullback in shares.
- Morgan Stanley analyst Brian Nowak lowered the PT to $4,000 from $4,100 and affirmed an Overweight.
- Margin pressures were guided to be even higher than he thought they would in Q4, which he sees speaking to the higher operating margin pressure on the retail business from more hiring, higher hourly labor costs, freight costs, and higher content spend.
- While he notes his revised Q4 operating income forecast, which is just above guidance, implies they will lose about $7B this holiday season in retail, Nowak doesn't believe Amazon's view of its long-term retail profit potential has changed.
- Instead, he thinks the company has increased its "offensive" investments and that its high margin ad and AWS revenue streams have ramped.
- Mizuho analyst James Lee lowered the PT to $3,950 from $4,100, implying a 14.6% upside, and maintained a Buy.
- The analyst says the revenue growth guidance for Q4 was lower than anticipated by five points due to supply constraints and mix shift to post-pandemic spending such as travel.
- However, he remains positive on Amazon in the longer term and believes that supply chain issues and elevated shipping costs are temporary, not structural. As such, Lee would buy the stock on the earnings weakness.
- Stifel analyst Scott Devitt expects Amazon shares to be "a big outperformer in 2022," views the share decline as an "attractive buying opportunity" and maintained a Buy rating with a $4,400 price target on the stock.
- Credit Suisse analyst Stephen Ju raised the price target to $4,200 from $4,100 and kept an Outperform rating.
- Amazon's 1P inventory days are at the highest they have ever been heading into the holidays, and further as its ability to store 3P inventory is no longer capacity-constrained, Ju views this as an opportunity to pick up wallet share as it will have greater levels of merchandise availability vs the competition.
- Goldman Sachs analyst Eric Sheridan lowered the price target to $4,100 from $4,250 and reiterated a Buy rating following last night's "mixed" results.
- However, with a Q4 revenue guide that was "much better than feared," Amazon is well positioned to navigate any potential supply chain driven inventory issues to meet consumer demand, Sheridan notes.
- The analyst says that while investors are likely to be disappointed by Amazon's operating profit narrative short term, the company is making a smart strategic move to crystallize e-commerce penetration gains from the pandemic period into more normalized consumer shopping velocity.
- Price Action: AMZN shares traded lower by 4.48% at $3,292 in the premarket session on the last check Friday.
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