Analysts Suggest Investors Take Advantage of Recent Weakness in Amazon Shares

Amazon shares have experienced a significant decline of 15% since mid-September, raising concerns among investors. However, two analysts, James Lee from Mizuho and Doug Anmuth from J.P. Morgan, have suggested that this recent weakness presents an opportunity for investors to capitalize on ahead of the upcoming quarterly earnings report.

Despite multiple challenges faced by Amazon, including worries about consumer spending, rising fuel prices impacting delivery costs, intensifying competition in online shopping, and a recent Federal Trade Commission lawsuit alleging an illegal monopoly, the analysts remain positive about the company’s prospects.

Lee, in his research note, highlighted stable demand for Amazon Web Services (AWS) and the expectation of accelerating AWS demand in the coming year. He also noted that customers are reinvesting savings from cloud spending optimization into new areas, such as testing large language models and migrating data to the cloud.

Anmuth, on the other hand, expressed optimism about the outlook for AWS, citing moderating optimizations, new workload deployment, and easing year-over-year comparisons. He also emphasized Amazon’s growth supported by factors like same-day delivery, increased Prime member spending, and a strong third-party selection.

Regarding competition, Anmuth acknowledged the presence of China-based players in the online retail space but stated that most of the risk lies at the low-end of the market, while Amazon caters to a broad range of customers. He also viewed Amazon’s aggressive holiday hiring plan as a sign of strength in the business.

Both analysts believe that the Federal Trade Commission will face challenges in proving its case against Amazon, as they believe the company has advanced e-commerce and fostered innovation.

While Amazon shares experienced a 3.4% decline on Tuesday, the analysts maintain their positive outlook and recommend investors take advantage of the recent pullback.

(Source: Barron’s)