Amazon Stock Falls After Morgan Stanley Cuts Price Target. Here’s Why.
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An Amazon fulfillment center.
AFP via Getty Images
Amazon.com
stock was lower Monday after analysts at Morgan Stanley cut their price target, saying a push by the online retailer and tech giant to add to its logistics workforce was adding to profit pressures.
Amazon (ticker: AMZN) fell 1.14% to $3,387.25. Higher bond yields also were hitting the stock Monday, as they were other fast-growing tech shares. The
Nasdaq
was falling 0.55%.
Morgan Stanley analysts cut their price target to $4,100 from $4,300. They maintained their Overweight rating on the stock.
Analysts surveyed by FactSet also rate the stock at Overweight but with a higher average target price of $4,153.
“We have written in the past to how AMZN’s growing logisticsworkforce is set to enable more e-commerce share gains, faster ship speeds (1-day and same-day) and new business opportunities (like third party logistics) … but the cost of labor is rising,” wrote the analysts, led by Brian Nowak.
The analyst lowered his 2021 and 2002 EBIT estimates on Amazon by 16% and 19%, respectively.
Amazon announced in mid-September that it was hiring more than 125,000 drivers and warehouse workers and will pay them a starting average wage of more than $18 an hour —and up to $22.50 in some places.
The company has been on a hiring spree. At the beginning of September, the company announced it will fill 40,000 corporate and technology jobs; since the pandemic began in March 2020, Amazon has hired more than 450,000 people in the U.S.
“Near-term estimates are heading lower … but in our view it is also important to remember that rising wages are impacting all businesses (most recently
FedEx
(FDX) last week) and AMZN competitors,” the analysts said.
Barron’s reported last week how labor-cost inflation looked to be biting into profit margins at shipping giant FedEx.
“We acknowledge profit misses and slowing revenue may hold back AMZN’s ability to outperform through this investment cycle,” wrote Morgan Stanley. “In our view, AMZN may be tactically range bound until retail revenue can re-accelerate and beat expectations” in the first half of 2022.
Write to Joe Woelfel at joseph.woelfel@barrons.com
