Home technology cloud Amazon’s Shares Slip after Analyst Downgrade
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CIO Bulletin
2024-10-08
Analyst ratings have generally remained strong, most recently since the results showed Amazon’s cloud computing business faring well. But that hasn't prevented Wells Fargo from downgrading the stock out of fear for margins.
Amazon.com Inc. shares dipped 3 percent to $180.88 in Monday trade, after Wells Fargo Securities downgraded the stock to equal weight from overweight, citing margin trends. One of Wall Street’s lowest price targets, and it’s also dropped, to $183, from $225, was analyst Ken Gawrelski.
More than 90 percent of Amazon analysts on Wall Street rate the stock a buy, but Gawrelski's downgrading shows how already high pressure on the e-commerce company's margins might not be offset by continued strong growth of its cloud computing division. While Amazon has usually gained from positive revisions, he said, there are worries about operating income for the fourth quarter and margin caps in the first half of 2025.
Amazon, which has jumped nearly 19% in the year to date, slightly outperformed the NASDAQ 100 Index, which has risen around 18%. The average price target among analysts is around $219, suggesting an upside maybe as much as 21 percent in the next 12 months.
Amazon’s success is based, rather, on its Amazon Web Services (AWS) division, which is expected to enjoy long term demand, especially in artificial intelligence. But analysts warn against heavy investments in AI by the company.
AWS sales are projected by Bloomberg Intelligence to accelerate by 2025, able to exceed consensus estimates, too, as demand for non-AI IT spending plateaus.
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