![]() While I do acknowledge that Amazon's brand equity and favorable price-to-service ratio might prove quite defensive in a recession, I feel the data is too clouded to support high-conviction. Moreover, Amazon's e-commerce sales are likely to suffer in a recession-as all commerce activity does. While the company has managed to defend past lawsuits in the EU and the US, the anti-competition allegations against Amazon could accelerate and either force the company to spin-off units and/or slow market expansion. I believe any additional claim would only provoke already alerted anti-trust officials. As of Q1 2022, Amazon claims already a >50% market share in the US. Second, market share gain is also difficult. ![]() At the same time, Amazon's expansion in growth markets such as LATM and SEA sees increasing competitive pressure from local players, including Sea Limited ( SE), Mercado Libre ( MELI), JD.com ( JD), Alibaba ( BABA). There are two reasons to this claim: First, many of Amazon's primary target markets, notably NAM and Europe, have reached close to full e-commerce penetration. Seeking Alpha Challenging outlook for e-commerceĪfter many years of enormous growth, Amazon's e-commerce business has arguably achieved a level of business scale that makes sustained market growth difficult. Thus, as a function of the target-price, I assign a Sell recommendation. I value AMZN shares based on a residual earnings framework and calculate a fair base-case target price of $81.94/share, implying that Amazon stock could have another 30% downside. The company's cloud and streaming business, however, are likely to sustain strong topline growth. Personally, I see Amazon's e-commerce business entering a downturn as the global economic outlook worsens. However, at over x50 P/E the stock is still relatively expensive. 4kodiak/iStock Unreleased via Getty Images ThesisĪmazon ( NASDAQ: AMZN) stock is down more than 30% YTD and investors might be tempted to consider the company as a bargain opportunity.
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