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On Monday, Raymond (NSE:RYMD) James analyst Josh Beck downgraded Amazon.com stock (NASDAQ:AMZN) from a Strong Buy to an Outperform rating, simultaneously lowering the price target to $195.00 from the prior $275.00. Beck provided insight into the reasoning behind the downgrade, citing concerns over underestimated pressures on earnings before interest and taxes (EBIT) for the years 2025-26. These concerns arise from a combination of macroeconomic factors, tariffs, and increasing investment demands. The stock, currently trading at a P/E ratio of 30.5x, has seen a YTD decline of 21.3%. According to InvestingPro analysis, Amazon maintains a "GOOD" overall financial health score, with particularly strong marks in profitability metrics.
Beck’s analysis suggests that the Street might not be fully accounting for the potential EBIT pressures Amazon could face. Despite the e-commerce giant’s ongoing investments in supply chain, logistics, and artificial intelligence, the current economic landscape presents challenges. Beck highlighted that regardless of the permanence of tariffs, Amazon’s diversification efforts in supply chain and logistics, particularly with China’s gross merchandise volume (GMV) and rural U.S. delivery service providers (DSP), are expected to create financial drag. The company maintains strong fundamentals with revenue of $638 billion and an impressive revenue growth rate of 11%. InvestingPro subscribers can access 8 additional key tips about Amazon’s financial position and growth prospects.
The downgrade reflects a cautious stance on Amazon’s near-term investment returns and visibility. While the analyst remains optimistic about Amazon’s long-term investments and AI prospects, the current risks to EBIT and the slow progress in monetization make it difficult to maintain the Strong Buy recommendation. Based on InvestingPro’s Fair Value analysis, Amazon currently appears slightly undervalued, suggesting potential upside despite near-term challenges.
Beck also contrasted Amazon’s position with other companies, noting a preference for stocks like META (NASDAQ:META), with its clear AI product cycle and acknowledged risks in China; UBER, which is seeing a reduction in autonomous vehicle-related fears; and MELI, which operates in Latin America and has strong utilization and cohort profit drivers.
In conclusion, while Raymond James acknowledges the strength of Amazon’s long-term investments and AI potential, the firm anticipates near-term financial pressures that could affect the company’s earnings and has adjusted its rating and price target accordingly.
In other recent news, Amazon.com has seen several adjustments to its stock price targets by major financial firms. BMO Capital Markets reduced its price target for Amazon to $235, maintaining an Outperform rating, citing changes in market conditions and projections for the company’s performance. Cantor Fitzgerald also cut its target to $230 while keeping an Overweight rating, noting the impact of tariffs as a disruptive factor but highlighting Amazon’s potential to gain market share from physical retail. Citizens JMP adjusted its target to $240, maintaining a Market Outperform rating, amid Amazon’s plans to deploy over 3,200 satellites as part of Project Kuiper, which aims to provide global internet coverage.
The satellite project requires Amazon to have at least half of the satellites in orbit by July 2026 to maintain FCC (BME:FCC) clearance. Meanwhile, Amazon Web Services (AWS) experienced a network interruption affecting cryptocurrency exchanges Binance and KuCoin, illustrating the risks of centralized cloud infrastructure. Despite these challenges, analysts from BMO Capital and Cantor Fitzgerald remain optimistic about Amazon’s long-term prospects, citing its unique strengths and potential market opportunities. The recent developments underscore the complex landscape Amazon navigates, balancing technological ambitions with regulatory and market pressures.
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