Amazon, Inc. AMZN shares have materially underperformed the S&P 500 Index since the release of second-quarter earnings results on July 29, rendering sentiment toward the stock cautious into the year-end, according to an analyst at JPMorgan.
The Amazon Analyst: Analyst Doug Anmuth reiterated an Overweight rating on Amazon with a $4,100 price target.
The Amazon Takeaways: A wide range of concerns is besetting Amazon, including top- and bottom-line pressure and broader macroeconomic conditions, Anmuth said in a note.
Revenue growth is decelerating against tough COVID-19 comps and slower e-commerce in the second-half, the analyst said. JPMorgan expects e-commerce penetration to remain stable with the previous quarter at 18.5%, he said.
Amazon is likely to report third-quarter revenues of $111 billion and fourth-quarter revenues of $138 billion, Anmuth said.
Amazon could also be constrained by supply chain disruptions, the analyst said. With over 60 ships off the coast of Los Angeles and freight rates spiking, inventory concerns are rising into the fourth quarter, he said.
Supply chain issues could represent a downside risk to Amazon's second-quarter revenue growth and profit, Anmuth said, adding that some disruption is already factored into the third-quarter guidance and fourth-quarter estimates.
Amazon has tried to pull forward the timing of taking inventory ahead of the holiday season as much as possible, which should help ease disruption, the analyst said.
Amazon's investment cycle began in 2019 with a one-day delivery buildout and it continues as the company works to catch up with overall demand, he said. The investment suggests the company remains bullish on long-term demand and future growth, Anmuth said.
"We believe the stock, however, mostly anticipates that 2022 profit expectations are too high."
Amazon shares could see some upward momentum from people buying into the stock into the holiday, the analyst said.
AMZN Price Action: Amazon shares were trading 1.89% higher at $3.250.08 Tuesday afternoon.
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