Amazon (AMZN), whose share price fell to its lowest level since April 2019, was affected by the announcement by the company of its first quarterly loss since 2015. There is also ongoing downward pressure on the financial market.
Amazon reported a slowdown on online sales as well as a decline of its stake at Rivian, an electric vehicle manufacturer (RIVN). Amazon failed to meet Wall Street’s estimates of its operating income. It warned that there are headwinds that could affect its performance in quarter two, including “ongoing inflationary pressures and supply chain pressures”.
Amazon shares: Should you buy, sell, or hold them on the current dips?
We will be looking at the most recent Amazon stock forecast in this article.
Amazon releases mixed Q1 results
Amazon saw a strong rise in ecommerce sales during the Covid-19 pandemic. Amazon’s stock news reported that the tech giant saw a drop in operating income to $3.7bn during the first quarter in 2022. This compares with an $8.9bn increase in 2021.
The company reported a net loss in the first quarter of $3.8bn, or $7.56 per dilute share. This is compared to an income of $8.1bn (or $15.79 each diluted share) a year prior. The company also had a pre-tax loss of $7.6bn due to its stake in Rivian, (RIVN).
Andy Jassy (Amazon CEO) stated, “The pandemic and subsequent conflict in Ukraine have brought uncommon growth and challenges.”
“Consumer businesses have grown by 23% annually over these past two years. With extraordinary growth in 2020, which was 39% year-over–year, it was necessary to double our fulfilment network that Amazon had built over the first 25 years. We did this in less than 24 months.
“Today we don’t chase staffing or physical capacity. Instead, our teams are focused on increasing productivity as well as cost efficiencies within our fulfilment network.”
The increase in net revenue from Amazon Web Services (AWS), which was $18.44bn, was reported by the company. It reflects the shift of business customers to cloud networks. AWS operating income rose 56.6% year-on year to $6.5bn.
Amazon prepares for stock split
Amazon filed a statement with US Securities and Exchange Commission on 9 March stating that its board of directors had approved a 20 for 1 split of its common stock. This is the first stock split since dotcom.
Common stockholders will receive 19 additional shares for every share they own on or after 3 June, subject to shareholder approval. On 6 June, trading in Amazon shares on Nasdaq should begin on a split basis.
The board approved a plan that allows the company to buy up to $10bn of stock “opportunistically, from time-to-time when it believes this would enhance long term shareholder value”.
The expiration date for authorisations is flexible. The company can purchase back shares via “one or more open market transactions”, privately negotiated transactions, structured transactions through investment banking institutions or a combination.
This authorization replaces Amazon’s prior $5bn buyback plan approved in 2016. Amazon bought $2.12bn under this plan.
Analysts wondered if Amazon would go through a stock split. This was after Alphabet, Google’s parent company (GOOGL), announced that it would split its stock stock in July. Apple (AAPL), and Tesla (TSLA), announced stock splits for August 2020.
A stock split is not an effect on Amazon’s share value but it makes shares more accessible for retail investors who may not have the ability to buy fractional shares through their brokerage.
It gives employees more freedom to manage stock-based payments.
Stanislas Capital noted:
“Some analysts speculate that Amazon might be able to integrate the Dow Jones Industrial index by decreasing its share price. This would result in passive investment funds (funds tracking the index) being forced to purchase stock company stocks and increase company value.
Is Amazon’s slump in share prices a buying opportunity for you?
Amazon (AMZN), shares have dropped by 35% over the past year (YTD), going from just over $3,000. to $2,200. It is now at its lowest level in nearly two years.
The stock dropped to around $2700 in January. However, it rebounded above $3200 in February. In the meantime, the price of AMZN fell below $2900 due to a stock market selloff. The stock price recovered to $3.386 on March 29, but it fell again in April.
Amazon (AMZN), stock price plunged from $2.891 on 28/04 to $2.485 the next day after the earnings release. It has been declining since then, and is now at $2,173 (on 10 May).
According to technical analysis, the AMZN stock price was trading below its 20- and 10-day moving averages (MAs) as of 10 May. This signals a bearish trend. An asset with a relative strength index of 22 indicated that it was undervalued.
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Amazon stock forecast for 2022: Will AMZN ever climb?
“We still consider Amazon a top pick based on a 12-month outlook with an increasingly positive tilt in its risk/reward.”
Goldman Sachs
What’s the outlook for stock prices after Amazon’s earnings updates?
According to MarketBeat data at the time of writing (10 June), the average Amazon stock market price forecast was $3,817.44 from 38 Wall Street analysts.
The consensus view was that there is a strong upside to the current level. There were estimates ranging from $2,800 to $4,655. With one sell recommendation and one hold, 35 out of 38 stock ratings rated the stock as a buy.
MarketBeat data indicated that at least 19 banks and investment firms lowered their Amazon stock projections after the earnings report.
Deutsche Bank Research’s analysts wrote that “while this earnings week can be described as ugly, there is still important nuance across our sub-sectors for investors to think about as we look [at] how the balance of the year, and think about possible dislocations,” in a client note dated 8 May.
“Amazon set a far more positive tone regarding the consumer’s health in 2022. AMZN is likely to support fundamentals in a relative way because of its lower discretionary mix and higher income consumers.
“Looking ahead to the remainder of the year, it seems that the first step towards finding an incremental buyer in e-commerce stock will be when numbers reset low enough for 2H22 to make it competitive.”
Goldman Sachs analysts reduced their 12-month Amazon stock target, but remain optimistic about the longer-term outlook.
The stock is expected to trade within a trading range for the short term, as the market absorbs these cost narratives. “The catalyst path moving forward will be a combination of better than expected growth (given investors fears over post-pandemic economic normalisation and macroeconomic Headwinds) and/or forward Management commentary about 2H’22 (second quarter of 2022), that can demonstrate a significant margin ramp from 1H’22 (first quarter of 2022),” they wrote to clients in a client letter on 29 April.
“We see Amazon as a top choice on a 12-month basis with an increasing positive risk/reward ratio after further de-rating following this earnings report. We have reaffirmed our Buy rating. We adjusted our estimates and decreased our PT to $3,700 from $4,000 to take into account 2022 headwinds.
Jefferies’ analysts revised their Amazon share price outlook from $4,000 – $3,700. However, they added that they “see a pathway for second half outperformance driven primarily by an improved profit trajectory as well as continued AWS momentum”.
J.P. Morgan analysts argued that investors should buy the pullback, as AMZN is able to overcome cost pressures in future quarters. They maintained an overweight rating for AMZN stock but reduced their price target for December 2022, from $4,500 down to $4,000.
While analysts don’t often give long-term price targets to their clients, algorithms-based forecasting tools do. Wallet Investor made a bullish prediction for Amazon on the 10th of May. The stock was expected to trade as high as $2,663.508 at the end 2022, $3.247.416 at the end 2023, and $3.837.699 at the end 2024.
In five years, the stock could be worth $4,426.744 or $5,235.75.
CoinPriceForecast established a target price at $3,224 by 2022, and $3,794 in 2023. It predicted that the stock would reach $4,267 by 2025 and $5.767 by 2030.
It’s important that you remember that stock market volatility may make it difficult for you to establish a long-term price target. Both algorithm-based forecasters as well as analysts can sometimes make incorrect predictions.
Is Amazon a good stock?
It is important to do your research before you invest in any stock or other asset. This will help you determine if the investment is right for your portfolio. Before you make any investment decision, be sure to review the market trends and news. You cannot predict future performance. You should never lose money on investments.
Amazon (AMZN), like any stock, can be a suitable investment depending on your risk tolerance and how much money you are willing to invest.
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