- Amazon stock continues to fall, dragged down by growth concerns.
- Wall Street sees considerable upside for AMZN stock.
Amazon (AMZN) stock has now fallen for six straight weeks, by 2.3%, 1.1%, 6.2%, 0.9%, 0.8%, and 2.4% in each week, respectively. Collectively, AMZN stock fell about 13% between July 12 and August 23.
Part of the problem has been the online giant’s second-quarter earnings miss. Amazon’s EPS of $5.22 missed analysts’ estimate of $5.77 by a wide margin. Its stock has fallen about 10% since it posted its second-quarter results. US-China trade tensions, heightened competition, mounting regulatory scrutiny, and political criticism have also pressured the stock.
Similar to its large tech peers, Amazon has been impacted by growing regulatory scrutiny. Amazon’s astounding growth and dominance in retail and cloud computing have raised many eyebrows, especially among lawmakers. This regulatory pressure could restrain Amazon’s growth potential.
Furthermore, Jeff Bezos and Amazon have been taking a lot of flak from politicians. Several issues, including tax, wages, aggressive promotions, and business practices, have prompted leaders to criticize Amazon. Donald Trump, Bernie Sanders, and Elizabeth Warren are some of its critics.
Competition heats up in retail
Bearish markets have also hurt Amazon. The growing fear of a global slowdown and US-China trade tensions have dragged down AMZN stock. The company is also seeing increased competition from retail giants Walmart (WMT) and Target (TGT). Both retailers have expanded their digital business to match Amazon’s fulfillment options and pricing.
They have also successfully defended and expanded their share of the grocery market, driving traffic and generating robust sales. Furthermore, Walmart is presenting tough international competition for Amazon through its Flipkart acquisition in India.
Amazon is thinking about stepping up its investments to reduce delivery time for Prime members. During the company’s first-quarter conference call, senior VP and CFO Brian Olsavsky stated the company is working to shorten its free two-day Prime shipping to one day.
Wall Street sees huge upside for Amazon stock
Despite Amazon’s challenges, Wall Street loves its stock. AMZN has seen astonishing growth in the last decade. Of the 49 analysts covering the stock, 47 recommend “buy,” one recommends “hold,” and one recommends “sell.” Their average target price of $2,261.27 for AMZN stock implies a 27.8% upside based on its August 26 closing price of $1,768.87.
Amazon stock had risen 17.8% year-to-date as of yesterday. Analysts expect Amazon’s sales and EPS to grow robustly this year, and to continue to do so next year.