Maybe in hindsight it was all inevitable. Stocks which were world beaters during the pandemic were bound to face a day of reckoning once normality resumed. Amazon (AMZN) was one of the Covid era’s biggest beneficiaries, as out of necessity, the internet shy finally moved online.
However, given very tough comps, the move back to the high street and the associated post-pandemic headwinds, the payback has been brutal. Nevertheless, it’s probably safe to say, most would not have foreseen the ecommerce giant’s shares losing 35% of their value over the first half of 2022.
However, despite the noticeable slowdown in ecommerce trends, Truist 5-star analyst Youssef Squali is not concerned, believing the company’s “strong fundamentals” remain intact.
In fact, Squali has a list of reasons why Amazon’s prospects are sound. These include: “1) sustainable leadership position (~40% share) in the US, amid a secularly growing ecommerce segment; 2) leadership position in cloud (30%+ share) with growth in the early innings still; 3) best-in-class customer experience with high NPS scores, 4) growing digital advertising footprint, making it the #3 player behind GOOGL (Buy) and META (Buy); 5) a massive logistics network for a speedy 1-2 day delivery, now being made available to off-Amazon merchants through a potentially powerful Buy with Prime.”
That’s not to say Amazon is completely out of the woods just yet. There are more tough comps to face in Q2, while cost pressures remain “elevated,” and the economy has been showing plenty of signs that is slowing down. Still, such concerns are already “baked into the current valuation,” while the ironing out of efficiency kinks continues, and the prospect of further growth for AWS and Advertising “bode well for profitability.”
To this end, Squali rates AMZN shares a Buy, along with a $175 price target. Should the figure be met, the shares will be changing hands for a 61% premium a year from now. (To watch Squali’s track record, click here)
Looking at the consensus breakdown, 1 Hold and Sell, each, are countered by 36 Buys, making the stock a Strong Buy amongst Wall Street’s analysts. The average price target is just a touch higher than Squali’s objective; at $178.56, the figure makes room for one-year gains of ~64%. (See Amazon stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.