Here's Why This Analyst Is Cautious On Amazon

  • BNP Paribas Exane gave an Underperform rating to Amazon.com Inc AMZN, citing a bumpy ride ahead due to surging inflation and higher expenses.
  • Analyst Stefan Slowinski said investments during the pandemic to build fulfillment centers for faster deliveries and employee bonuses to keep its warehouses staffed in a tight U.S. labor market may eat into its margins.
  • He added that capital expenditure could grow in the mid-teens, initiating a price target of $2,800, implying a downside of 15.8%.
  • While margin expansion is possible, the consumer is under pressure with high inflation. Amazon has already raised prices on their customers by increasing their Prime pricing.
  • Amazon would not raise pricing on many products to match inflation and probably take a hit.
  • Amazon would need to allocate capital expenditure for its cloud business as it looked to expand its footprint by about 30% in a competitive market.
  • Price Action: AMZN shares traded lower by 1.46% at $3,336.97 on the last check Wednesday.
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