Analyst Doug Anmuth has kept his price target for Amazon at $4,350. Here's why he's so bullish.
The stock market has been plummeting in January, due mostly to concerns about upcoming Federal Reserve rate hikes.
The S&P 500 has lost 7.2% of its value year to date. And the tech-heavy Nasdaq Composite has done even worse, falling 11.6%.
At the same time, Amazon stock has lost 12%.
However, JPMorgan's Doug Anmuth is still bullish on AMZN. In fact, the Seattle-based company is his firm's top pick for 2022.
Anmuth rates the stock as a strong buy with a $4,350 price target. That would imply an upside of 43%. Is it time to buy the dip?
Off to a Slow Start
Investors shouldn't expect a short-term rally for Amazon. Although the company likely performed very well during the challenging holiday season, macroeconomic headwinds — inflation, potential interest rate raises, and increased labor and operational costs — remain a risk for the e-commerce giant.
In fact, Anmuth has lowered his revenue projection for the first quarter of 2022 to $120.5 billion, which would represent 11% growth year-over-year. In comparison, Amazon saw 44% year-over-year growth in the first quarter of 2021.
Anmuth also trimmed his 2022 earnings per share (EPS) estimates from $79.47 to $75.17. He explained:
“Though our estimates come down, we believe lower expectations should help de-risk shares and AMZN will become a cleaner story to own through 2022,” he wrote in a research note.
But Amazon Will Accelerate Again
JPMorgan's Doug Anmuth believes revenue should start to accelerate by the second quarter, driven by five main factors:
- A combined sales boost in its grocery, accessories, and furniture divisions, plus a selective price increase in these categories.
- An ease in operating costs, due to the infrastructure investments made in 2021. This would leave space for some extra marketing expenditure.
- The increase in FBA (Fulfilled by Amazon) fees, which would ultimately lead to an extra $1 billion to Amazon’s bottom line(discussed by Morgan Stanley’s Brian Nowak)
- A possible price hike for Prime membership, which would result in another $3 billion in Amazon’s coffers.
Our Take
Despite Wall Street’s bullish views on Amazon shares, concerns over macroeconomic issues have been a main factor in the stock market right now. They've dragged down both the S&P 500 and the Nasdaq Composite.
In such an uncertain scenario, buying the dip could be a reasonable approach for AMZN's long-term bulls. But short-term speculators may still watch their shares bleed. This looks like a classic case of high risk, potentially high reward.