Amazon stock still a ‘compelling opportunity’ despite cloud concerns, says JPMorgan
Published: December 16, 2022 at 4:20 pm ET
Sentiment towards Amazon.com Inc. ‘s stock “is at a multi-year low,” according to JPMorgan analyst Doug Anmuth, but he thinks investors aren’t giving the e-commerce giant enough credit.
A main source of controversy on Amazon AMZN, he said, is the company’s cloud computing business, as some customers want to rein in spending amid a rocky macroeconomic backdrop.
Even…
Sentiment towards Amazon.com Inc. ‘s stock “is at a multi-year low,” according to JPMorgan analyst Doug Anmuth, but he thinks investors aren’t giving the e-commerce giant enough credit.
A main source of controversy on Amazon
AMZN
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according to him, it’s the company’s cloud computing business as some customers look to curb spending amid a rocky macroeconomic backdrop.
Even so, Amazon looks well positioned for secular growth, and that part of the business is “well positioned,” Anmuth said.
“In many cases, AWS helps customers move to lower storage tiers or instance tiers, while also using its own Graviton chips that provide better price performance and drive higher margins for AWS through better optimization,” he continued. “AWS also prices mostly in USD and works closely with international customers who are now seeing significant price increases related to currency.”
Such initiatives “are likely to result in some price concessions in the short term, but also better customer relationships in the long term,” Anmuth said.
He will also monitor AWS profit trends. “Looking forward, we are hopeful that after a heavy build-out period — and slower usage growth — AWS may soon slow data center and infrastructure investments,” he wrote.
See also: 5 Reasons Why Meta Stock Is Worth Buying Now, According to JPMorgan
Anmuth noted that there are also pressures on the retail side of the business, but Amazon has levers to pull.
Beyond the fourth quarter, “improving inventory levels and faster delivery speeds should help drive stronger demand,” he said, and comparisons ease in 2023, paving the way for a re-acceleration in retail revenue growth.
The company can also make progress when it comes to profits. While Anmuth lowered his 2023 operating income estimates by 21% in his latest note to clients, he also wrote that Amazon should see fulfillment pressures ease as the year progresses, and it could save more money through additional staff cuts.
All told, he lowered his price target on Amazon’s stock to $130 from $145 in his Friday report, though he said Amazon is still a “compelling opportunity” for investors, and he rates the stock as overweight.
