Amazon Stock Price-Weak Q4 Guidance, Slumping Fundamentals, and More!

Amazon Stock Price: $94.14

Consensus Rating: Strong Buy

12-Month Price Target: $140.50

Market CAP: $960.39 Billion

 

Amazon Shares-Highlights:

  • Amazon posted poor third-quarter statistics and provided a negative outlook for the fourth quarter.
  • The corporation faces two major challenges: declining profitability and slowing expansion.
  • The consumer experience is deteriorating as the number of advertisements on the website increases.
  • AWS continues to be the crown jewel, with excellent profitability and respectable growth.
  • Given the slumping fundamentals, we feel the decline in valuation multiples is warranted.

 

Despite the fact that Amazon (AMZN:NSD) continues to be an impressive company that has generated outstanding returns for its shareholders, there are growing indications that its fundamentals are worsening.

For instance, Amazon posted unsatisfactory third-quarter results and provided weak outlook for the fourth quarter. For the third quarter, the business recorded worldwide net sales of $127.1 billion, an increase of 19% year-over-year, and an operating income of $2.5 billion.

Regarding guidance, net sales for the fourth quarter are anticipated to be between $140.0 billion and $148.0 billion or to increase between 2% and 8% compared to the fourth quarter of 2021.

Given the relatively weak profitability, this amount of growth no longer justifies an inflated price. Significant Amazon stock-based compensation, which increased to $5.6 billion in Q3 from $5.2 billion in the second quarter, further dilutes shareholders.

Not only are the financials declining, but we also believe that the consumer experience is degrading. It appears that everything on Amazon is now an advertisement due to the pervasiveness of advertisements on the site.

In the third quarter, 58% of all paid units were sold by third-party vendors, the largest percentage ever. Unfortunately, Amazon has less control over the quality of products sold by third parties compared to those sold directly by the corporation.

With many search results yielding “Sponsored” products, it is becoming increasingly difficult for users to determine whether they are being displayed a product because it is a good alternative or because a third-party vendor has purchased an advertisement.

Sellers, who must now pay considerable sums to advertise on Amazon, are increasing prices to offset the rising cost of doing business, so diminishing the customer experience and rendering Amazon a less competitive shopping location.

 

Amazon Stock Price-Fundamentals:

Free Cash Flows:

Amazon has historically prioritized free cash flow production, but it went negative last year and will likely do so again this year.

In the past two years, the corporation has doubled the size of its network, largely due to capital expenditures. Thankfully, the corporation is becoming more prudent with its capital expenditures.

Operating Revenue:

The operating margin has declined significantly over the past few quarters. In actuality, it is currently below the company’s ten-year average, thereby wiping out the operating leverage gains the company had gained in previous years.

Operating income has declined dramatically. In Q3 2021, the trailing twelve-month operational income was $28 billion, down 54% year-over-year to less than $13 billion. It is impossible to explain a valuation of one trillion dollars with $13 billion in operating profits.

Net Income:

In addition to the increase in Prime Video content and marketing expenses, the business cited these as reasons affecting profitability. The global debut of Rings of Power and the launch of the NFL Thursday Night Football package in the United States are clear examples.

Important headwinds include inflation, excessive capital expenditures, supply chain challenges, and certainly the most significant factor is demand that is weaker than anticipated. The end result was a trailing twelve-month net income of somewhat more than $11 billion.

Growth:

Amazon’s revenue graph is remarkable, but growth is beginning to decline. Comparatively, Amazon’s revenue is approaching Walmart’s (WMT) trailing twelve-month revenue of $600 billion.

Once firms reach this size, it becomes extremely difficult to sustain significant growth rates.

With the reopening of the economy, Amazon stock price growth pace decreased dramatically. Amazon, therefore, faces two major issues: falling profitability and a slowing growth pace.

Balance Sheet:

Amazon has ample money, but a substantial amount of long-term debt. Given the company’s present negative free cash flow, investors should keep a careful eye on the balance sheet, as it could rapidly deteriorate.

The company’s leverage is acceptable at 1x financial debt to EBITDA, but we would feel much more comfortable if it had a strong net cash position. Cash and short-term investments have decreased recently, but long-term debt has increased.

Valuation:

At first glance, the valuation appears favorable, with valuation multiples such as EV/Revenues well below the ten-year average. However, we would advise caution, as fundamentals are weakening, and we do not anticipate the next ten years will produce growth comparable to Amazon’s prior decade.

The EV/EBITDA ratio is also substantially below the 10-year norm and does not appear to be excessively pricey. Profitability is currently declining, and growth is decelerating, which is an issue. Considering this, an 18x multiple no longer seems so inexpensive.

 

AWS Remains the Winner:

The reason we are not more pessimistic about Amazon stock price is that its AWS division continues to provide good results, despite growth slowing considerably.

Third-quarter AWS net sales climbed by 27% year-over-year to $20.5 billion, indicating a yearly sales run rate of $82 billion. Amazon said that, as a result of macroeconomic unpredictability, AWS customers have become more cost-conscious.

Therefore, AWS has been working with clients to reduce their bills. The business claims that Graviton3 processors provide 40% better pricing performance than equivalent x86-based instances. This indicates that AWS will gradually displace chips from companies such as Intel (INTC:NSD) and NVIDIA (NVDA:NSD).

AWS is also challenged by rising energy expenses, which compels the company to search for ways to optimize its operations to utilize less energy. In spite of this, the company’s operating profit for the third quarter of 2022 was $5.42 billion.

 

Amazon Stock Price-Risks:

The fundamentals of Amazon are deteriorating, which is arguably the biggest danger for investors. It remains to be seen whether the corporation will reverse the deteriorating trend in profitability and reignite rapid sales growth.

It is becoming evident that the company overinvested in capital expenditures, and it is now battling to increase its operating margins. Some of its top competitors are gaining a great deal of e-commerce expertise, further complicating the situation. This category covers Walmart (WMT:NYE) and Costco (COST:NSD).

 

Takeaway:

There are numerous indications that Amazon’s fundamentals are weakening, and diminishing profitability and decelerating growth reflect this.

Given the increase of adverts on the website, we would claim that the customer experience has also declined.

Despite the fact that the value appears attractive relative to historical multiples, we would be cautious given the evident indications of deteriorating fundamentals. AWS’s continued solid performance is the primary reason we are not more pessimistic about the firm.

Amazon Stock (AMZN:NSD) Rosenblatt cuts the target to $104

The fundamental analysis for Amazon stock is rated with a score of 6.7 out of 10, where the stock is considered as  bullish.

Amazon Stock Analyst rating changes:

Rosenblatt Securities just published a note updating their coverage on Amazon stock.  The analyst has maintained their Neutral rating on the stock and cut the 12-month target forecast to $103 from $118 per share.

STA Research maintained the Buy rating on the stock, with a $150 price target on the stock for a 12-month period.

 

Amazon Stock Analysis:

Based on the stock projections made for Amazon stock by 39 analysts, the company’s average 12-month target price is expected to be USD 142.27. The typical analyst rating for Amazon stock is Strong Buy. Amazon stock analysis by Stock Target Advisor is Slightly Bullish and is based on 8 positive and 4 negative signals. The stock price of Amazon was US$100.79 at the most recent close. The share price of Amazon has moved over the course of the last week, month, and year by +10.78%, -10.43%, and -42.82%, respectively.  The Crowd rating for the stock is a consensus Buy.

 

News:

News has just surfaced that Amazon intends to layoff roughly 10,000 workers in the company’s business and technical roles starting this week. The cuts would be the biggest in the company’s history and would mostly affect Amazon’s devices department, retail division, and human resources. Less than 1% of Amazon’s global workforce and 3% of its corporate personnel would be affected by the alleged layoffs.

At the end of 2021, Amazon has 1.6 million full-employees, which was up a 102% from the 798,000 employees at the end of 2019.

The company relies heavily on the holiday shopping season, the company usually  increases the employee count during this crucial period. CEO Andy Jassy has been actively reducing costs all year to protect the company’s cash flow as it deals with sluggish sales and a dour global economy.

The company made plans to stop  hiring in its retail division.  Amazon recently terminated its telemedicine service, and cancelled or delayed the opening of some new warehouse locations, and closed all but one of its U.S. call centres, and also killed off its roving delivery robot, and closed some of it’s physical stores.

Amazon just released poor third-quarter earnings that really concerned investors and sent its shares diving as a result.

Amazon’s stock has fallen over40% so far this year,  on track to have its worst year since 2008.

 

Fundamental Analysis

 

Positive Fundamentals

High market capitalization
This organisation is among the top quartile and is one of the biggest in its industry. These businesses are typically more reliable.

Superior returns on risk
In the top quartile, this stock has outperformed its sector rivals on a risk-adjusted basis over the course of at least a 12-month holding period.

Low volatility
For a hold duration of at least 12 months, the Amazon stock yearly returns have been stable and constant when compared to peers in its industry, and they are in the top quartile. Although stability is desirable, it can also restrict returns.

Excellent return on equity
The management of the company has outperformed its competitors in terms of return on equity over the last four quarters, ranking it in the top quartile.

Superior capital efficiency
In the last four quarters, firm management outperformed its counterparts in terms of return on invested capital, putting it in the top quartile.

Positive cash flow
The last four quarters saw positive total cash flow for the organisation.

Positive free cash flow
The last four quarters saw the company generate positive total free cash flow.

Superior growth in earnings
In the preceding five years, Amazon stock profits growth was in the top quartile for its industry.

 

Negative Fundamentals

Overpriced in relation to earnings
The Amazon stock is trading above the sector median and at a premium to its peers in terms of price to earnings.

Overpriced compared to book value
On a price to book value basis, the Amazon stock is selling at a premium to the median of its peer group.

Overpriced based on cash flow
On a price to cash flow ratio, the Amazon stock is trading at a premium to that of its competitors. Its pricing is higher than the sector median. Whenever you are thinking about buying, go with prudence.

Overpriced based on free cash flow
On a price to free cash flow basis, the stock is trading at a premium to that of its competitors. Its pricing is higher than the sector median. Whenever you are thinking about buying, go with prudence.

The fundamental analysis for Amazon stock is rated with a score of 6.7 out of 10, where the stock is considered as  bullish.

Amazon (AMZN:NSD) Stock gets hit after earnings, is it now a Buy at 2020 lows?

Amazon’s stock currently has a fundamental score of 6.7 out of a score of 10, where 0 is very bad and 10 is very  good.

37 analysts have forecasted the stock price for Amazon, over the next 12 months at USD 171.82. The consensus analyst rating for Amazon is a Strong Buy. Amazon stock analysis by Stock Target Advisor is Slightly Bullish and is based on 8 positive and 4 negative signals. The stock price of Amazon was USD 115.66 at the most recent close. The stock price of Amazon changed by +0.51% over the previous week, +0.44% over the previous month, and -31.48% over the previous year.

The Crowd 12 month target forecast for the stock is $133.50 per share, with a Crowd Rating of Buy for the stock.

Amazon Stock Earnings News:

Amazon.com Inc.  just released its earnings after market close, revealing the first quarterly profit of the year, but predicted that holiday sales and profit would come in well lower than analysts estimated figures, while the company’s  cloud growth slowed, which hit the company’s stock in after hours trading.  Amazon estimates revenue of $140 to $148 billion for the holiday quarter, which missed analyst’s estimates of $155 billion. In the third quarter, Amazon earned sales of $127.10 billion, up 15% from last year, while  the company’s AWS revenue was reported $20.5 billion, which again   missed analyst estimates of $21 billion for the quarter.

Amazon.com warned that expenditures could obliterate its profit for the current quarter, as labour and shipping costs continue to rise under inflationary pressures, and results from early holiday marketing so far has failed to spur a growth in sales. The company’s new CEO, Andy Jassy, has been trying to keep expenses under control across Amazon’s wide range of companies in the face as inflation bites, and consumers clamp down as their finances continued to be squeezed evaporating their disposable income.

The online retailer has tried to cut costs by delaying new hires, and slowing down warehouse openings by months. A long-promised project to transport items using tiny autonomous sidewalk cars is being scaled back, and it was stated that its virtual health-care service would be shut down by year’s end.

 

Fundamental Analysis:

 

Positive Stock Fundamentals:

Market capitalization is high:  The compamy is among the top quartile and is one of the biggest in its industry. These businesses are typically more reliable.

Superior returns on risk:  In the top quartile, this stock has outperformed its sector rivals on a risk-adjusted basis over the course of at least a 12-month holding period.

Low Volatility:  For a hold duration of at least 12 months, the stock’s yearly returns have been stable and constant when compared to peers in its industry, and they are in the top quartile. Although stability is good, keep in mind that it can restrict returns.

Excellent return on equity:  The management of the company has outperformed its competitors in terms of return on equity over the last four quarters, ranking it in the top quartile.

Superior capital efficiency:  In the last four quarters, firm management outperformed its counterparts in terms of return on invested capital, putting it in the top quartile.

 Cash flow is positive:  The last four quarters saw positive total cash flow for the company’s operations.

Free cash flow is Positive:  The last four quarters saw the company generate positive total free cash flow.

Superior growth in earnings:  In the preceding five years, this stock’s profits growth was in the top quartile for its industry.

 

Negative Stock Fundamentals:

Overpriced in comparison to Valuations:   The stock is trading above the sector median and at a premium to its peers in terms of price to earnings.

Overpriced compared to book value:  On a price to book value basis, the stock is selling at a premium to the median of its peer group.

Overpriced based on cash flow:  On a price to cash flow ratio, the stock is trading at a premium to that of its competitors. Its pricing is higher than the sector median.

Expensive based on free cash flow:  On a price to free cash flow basis, the stock is trading at a premium to that of its competitors. Its pricing is higher than the sector median.

 

Is Shopify a Buy, Hold or Sell after Earnings?

With Amazon’s earnings out in the open, and the dismal fourth quarter forecast revealed, the company’s shares now trade at their March 2020 lows under the depths of the pandemic. If the macro economic picture worsens, then Amazon’s revenue would continue to get hit, as customers continue to tighten their belt, as concerns over consumer spending will like send the markets spiralling downwards. and push the economy further into recession.  If we look at the long term chart of Amazon, we can see that under a further significant market downturn, it’s very possible the stock could hit the $50 range, which would mean the stock could get cut in half from here. Bottom line is, caution is the theme for the short term, but the stock could be considered a long term buy at this point, as the current valuation is very attractive here, and buying any further weakness in increments will be seen as a very prudent investment in the future.

Amazon’s stock currently has a fundamental score of 6.7 out of a score of 10, where 0 is very bad and 10 is very  good.

Alibaba Inc. (BABA:NSD) Analysts still rate as a Strong Buy on China news

Alibaba stock price prediction analysis: According to 14 analysts’ stock projections for Alibaba Group Holding Ltd, the company’s average 12-month target price is USD 153.11. The consensus analyst recommendation for Alibaba Group Holding Ltd. is Strong Buy. Alibaba’s stock analysis by Stock Target Advisor is Slightly Bullish and is based on 6 positive and 4 negative signals. The stock price of Alibaba Group Holding Ltd. was 72.18 USD at the most recent close. The stock price of Alibaba Group Holding Ltd. changed by -1.15% over the previous week, -8.40% over the previous month, and -59.38% over the previous year.

The average 12 month Crowd target on the stock is $183 per share, with a Crowd rating of Strong Buy.

 

Most Recent Analyst Ratings for BABA’s stock:

Alibaba stock price prediction: Recently Barclays Capital maintained the Overweight rating on the stock, and cut the target to $135 from $161. The target was lowered by Morgan Stanley to $110 from $140.  Deutsche Bank Capital however raised their target to $160 from $155. Bank of America maintained the Buy rating and cut the target to $155 from $162.

 

Alibaba Stock Price Prediction News:

A political shake-up in the second-largest economy in the world tightened President Xi Jinping’s hold on power, which investors feared may be bad for private companies. As a result, Chinese technology stocks plunged on Monday.

In Asia, tech behemoths Tencent and Alibaba both experienced more than 11% declines; Baidu, a search engine, fell by 12%; and Meituan, a food delivery service, fell by more than 14%.

The actions follow Xi’s preparations for an unprecedented third term as president and the influx of supporters into the Politburo standing committee, the centre of power within the Chinese Communist Party, which is now in power.

According to Xin Sun, senior lecturer in Chinese and East Asian business at King’s College London, this makes it unlikely that anyone will question any “policy blunders” that Xi makes that would impede the expansion of the IT sector.  Sun stated: “Now that the new Politburo standing committee is full of Xi’s own picks and those in rival factions… were all out, it becomes clear that no other political elite dares to challenge his policy errors or even stray slightly from his preferred policy agenda, which of course over the past few years has focused on favouring the state sector at the expense of the private one.”

Therefore, it is doubtful that these policies will be changed or modified, which creates a very bleak prognosis for the economy.

China has tightened regulations on the internet industry in areas like data privacy and how algorithms can be utilized thanks to policies put in place under Xi’s leadership.

While the majority of the world’s economies have opened this year, Xi has continued to impose the stringent “zero-Covid” policy, which has resulted in cities being closed down this year, including Shanghai, a major global financial centre.

The fund manager mentions these two EV stocks and says, “There’s lots to purchase in China.”

With their weakest growth ever reported this year, Chinese digital giants Tencent and Alibaba have lost billions of dollars in value as a result of these two policies.

Justin Tang, head of Asian research at United First Partners,  said that “tech stocks have never been the closest buddy of Xi” and that “it’s evident that the market feels the purge will continue.”

Li Qiang, the Shanghai party secretary, is anticipated to become premier in China’s upcoming leadership transition. Li was in charge of this year’s lockdowns and zero-Covid strategy in Shanghai. He hasn’t held the position of vice premier, breaking with a long-standing Communist Party tradition. Premier Li Keqiang’s successor, Li, is seen as being pro-business.

Investors are anxious about the future, according to Sun, in part because the new leadership is mostly made up of party officials “who had limited to no prior expertise or credible record in economic management.”

Sun attributed the unfavourable market sentiment toward China tech stocks to “a rigid political regime with limited capacity to correct many of its policy mistakes, the lack of capable and experienced economic policymakers, and growing geopolitical risks, all under the leadership of a single person whose track record has proven unfriendly towards the private sector.”

However, not all analysts are concerned about further regulatory tightening. In the last few months, Beijing has taken less dramatic regulatory action against tech giants, prompting some commentators to suggest a softening stance from the government toward internet companies.

 

Is Alibaba’s Stock Safe With China’s Policies?

Some Analysts are concerned, and other Analysts believe the stock’s current valuation near it’s 52 week low is an attractive proposition, and eventually investors will be rewarded.  However, caution should be at the forefront as new policies could really negatively affect Chinese Tech companies to compete internationally with restrictive policies.  The stock is currently Slightly Bullish, with a score of 6 out of 10, where 0 is very bearish and 10 very bullish.

 

Fundamental Analysis:

 

Positive Fundamentals:

High market capitalization
This organisation is among the top quartile and is one of the biggest in its industry. These businesses are typically more reliable.

Low Volatility
For a hold duration of at least 12 months, the stock’s yearly returns have been stable and constant when compared to peers in its industry, and they are in the top quartile. Although stability is desirable, it can also restrict returns.

Excellent return on equity
The management of the company has outperformed its competitors in terms of return on equity over the last four quarters, ranking it in the top quartile.

Excellent return on assets
The management of the company has outperformed its counterparts in terms of return on assets over the last four quarters, putting it in the top quartile.

Healthy cash flow
The last four quarters saw positive total cash flow for the organisation.

Favourable free cash flow
The last four quarters saw the company generate positive total free cash flow.

 

Negative Fundamentals:

Sub par risk-adjusted returns
In comparison to its rivals, this company’s risk-adjusted return performance is below average. The returns are unpredictable, even if it is outperforming in terms of returns. Be careful as you go.

Lower than average dividend returns
In comparison to its competitors, the company’s average income yield during the past five years has been low. If you are not seeking for work, it is not an issue.

Excessive Valuation
The stock is trading above the sector median and at a premium to its peers in terms of price to earnings.

Overpriced based on cash flow
On a price to cash flow ratio, the stock is trading at a premium to that of its competitors. Its pricing is higher than the sector median. If you’re thinking about buying, exercise cautious.

 

 

Analysts rate Chewy Inc. (CHWY:NYE) with a Buy rating and a $42 target

Piper Sandler raised the CHWY stock price target to $34.

Based on the Chewy Stock Forecast from 17 analysts, the average analyst CHWY stock price target price for Chewy Inc is USD 42.03 over the next 12 months. Chewy Inc’s average analyst rating is Buy. Stock Target Advisor’s own stock analysis of Chewy stock forecast is Slightly Bullish, which is based on 6 positive signals and 4 negative signals. At the last closing, Chewy Inc’s stock price was USD 36.67Chewy Inc’s stock price has changed by +3.58% over the past week, +3.92% over the past month and -43.18% over the last year.

 

About Chewy Inc. (CHWY:NYE):

Chewy, Inc., together with its subsidiaries, engages in the pure play e-commerce business in the United States. The company provides pet food and treats, pet supplies and pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its www.chewy.com retail Website, as well as its mobile applications. It offers approximately 100,000 products from 3,000 partner brands. The company was founded in 2010 and is headquartered in Dania Beach, Florida.

 

What we like:

High market capitalization:

CHWY stock is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.

Superior risk adjusted returns:

CHWY stock has performed well, on a risk adjusted basis, compared to its sector peers (for a hold period of at least 12 months) and is in the top quartile.

Positive cash flow:

Chewy stock forecast shows that the company had positive total cash flow in the most recent four quarters.

Positive free cash flow:

Chewy stock forecast shows that the company had positive total free cash flow in the most recent four quarters.

Superior Revenue Growth:

CHWY stock has shown top quartile revenue growth in the previous 5 years compared to its sector.

High Gross Profit to Asset Ratio:

CHWY stock is in the top quartile compared to its peers on Gross Profit to Asset Ratio. This is a popular measure among value investors for showing superior returns in the long run.

 

What we don’t like:

Overpriced compared to earnings:

CHWY stock price is trading high compared to its peers on a price to earning basis and is above the sector median.

Overpriced compared to book value:

CHWY stock price is trading high compared to its peers median on a price to book value basis.

Overpriced on cashflow basis:

CHWY stock price is trading high compared to its peers on a price to cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.

Overpriced on free cash flow basis:

CHWY stock price is trading high compared to its peers on a price to free cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.