Shares of Amazon (AMZN 5.81%) were rising again today, up as much as 4.3% by 10:11 a.m ET on Wednesday.
Amazon has had quite the rally over the past week or so, going from the low $80s to the mid $90s. Today’s move came on the heels of an analyst maintaining its buy rating on shares. But additional optimism could be lingering from yesterday’s “Buy With Prime” announcement and hopes for falling inflation in tomorrow’s Consumer Price Index report.
On Wednesday, analysts at Cowen lowered their price target on Amazon from $160 to $140, but maintained their outperform rating on shares. While it’s never nice to see an analyst slash a price target, this is pretty standard when the stock has materially diverged from prior target levels.
Still, that $140 target is about 55% higher than today’s lowly share price, following an absolutely brutal year for the e-commerce and cloud leader.
Cowen was already bullish, but perhaps investors were expecting further downward revisions. Still, it’s hard to imagine that some 2022 headwinds for Amazon won’t improve in 2023.
Last year, Amazon faced decelerating growth coming off the pandemic, combined with higher costs from fuel prices, a strong dollar that hit international revenue, and its overly aggressive infrastructure build-out.
Yet in recent months, oil and gas prices have markedly declined, the dollar has weakened, and CEO Andy Jassy has announced cuts to Amazon’s real estate and up to 18,000 layoffs. When you consider that Amazon should have much easier year-over-year comparisons later this year, it’s a recipe for a recovery in profit growth.
Investors might also be following through on Tuesday’s positive news that Amazon will be rolling out Buy With Prime to third-party merchants more aggressively. The service offers Amazon’s free two-day shipping to merchants outside Amazon’s e-commerce platform.
After its pilot program revealed a 25% improvement in conversion for merchants using Buy With Prime, Amazon is now expanding it more aggressively, forming a competitive challenge to other delivery services and online e-commerce checkout buttons.
Investors might also be looking ahead to tomorrow’s Consumer Price Index report, which will reveal the inflation figures from last month. The past two reports have shown declining inflation, and if another reading comes in lower than expected, it could lead some to anticipate the Federal Reserve slowing or stopping its interest rate hikes sooner than they might let on. That would be good for growth stocks like Amazon.
Regardless of short-term moves, Amazon’s stock is still more than 50% off its all-time highs. Given its wide moats and leading competitive position in both e-commerce and cloud computing, long-term investors shouldn’t hesitate to pick up shares at these deeply discounted levels.
It’s not often one can buy the stock of such a market leader after such a big decline. While the short term is highly uncertain, even if we go through a recession, Amazon is likely to grow strongly for the next decade and beyond.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Billy Duberstein has positions in Amazon.com. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.