Since Q2 earnings day, Amazon stock has fizzled. Today, the Amazon Maven breaks down three of the most recent takes on AMZN from Wall Street equity researchers and experts.
Since July, Amazon stock owners have seen their shares drop while investors reset their expectations on e-commerce. Online retail has failed to maintain momentum in a post-pandemic environment, as consumer shopping habits have shifted closer to brick-and-mortar in 2021.
As the main player in US e-commerce, Amazon benefited from a sharp, but in part temporary consumption shift to the online channel in 2020. But with restrictions eased,Amazon’s Q2 report showed that aggressive growth rates may not be sustainable.
As physical stores gradually reopen, what will happen to Amazon’s financial performance? And what should investors expect of AMZN stock? Today, the Amazon Maven looks at a few theses.
e-Commerce: the pandemic outlier
As the Amazon Maven has recently pointed out, Wall Street might have gotten carried away by Amazon’s 2020 results and projected unrealistic expectations for 2021. Because the COVID-19 crisis has scaled back, astronomic growth projections had to be readjusted. As a result, some fund managers chose to shift their portfolio allocations as well.
In its Q2 2021 investor letter, investment firm Nelson Capital Management shared its views for Amazon stock. The quote below does not necessarily paint a bearish picture for Amazon, but a less bullish one for the current year instead.
"In the consumer discretionary sector, we trimmed pandemic winners in favor of companies we believe will outperform in a recovery period. We reduced our position in Amazon following its stellar performance through the pandemic. Though we believe online shopping is here to stay, we think some portion of consumer wallet share will transition to services and experiences."
The longer-term perspective
Despite having disappointed analysts' expectations in Q2, Amazon’s long-term fundamentals are arguably as solid as they have ever been. Bezos’ behemoth is not only a leader in fast-growing markets, but it also has a competent management team that has been executing as strongly as possible.
In a recently published analysis piece, boutique investment firm Livy Investment Research concluded that the e-commerce giant has its sails well adjusted for the journey ahead.
“Combined with society’s increasing reliance on e-commerce and demand for cloud computing infrastructure in the ongoing transition to digital, which are favorable trends to Amazon’s anchor businesses – Amazon.com and AWS cloud services – the company is slated to lead with promising uptrends in the next five years and beyond.”
Inflation is coming
Jim Cramer has a bit of a hot take on Amazon stock. As the possibility of a sharp increase in consumer prices remains on the table, concerning some analysts, the Mad Money host believes that investors should focus on companies that have pricing power over their competitors.
Below is what Mr. Cramer had to say about Amazon and other Big Techs:
“When you try to think of what’s working in this market... I want you to ask yourself, would you be insensitive to a price increase if the company put one through? [What are] the companies that can raise prices without infuriating you? Go buy their stocks.”
The Amazon Maven’s view
After overestimating Amazon’s growth in 2021, it is understandable that analysts would turn cautious in the short term as to avoid making the same mistake again.
Still, we point out that the consensus view on AMZN stock is consistent with the company’s more bullish, longer-term narrative. Even the most pessimistic of analysts have maintained their buy ratings on the stock after Q2 earnings, underscoring the idea that AMZN is probably a good stock to have in most buy-and-hold portfolios.