This week was miserable for the stock market, with all the main indexes tumbling sharply in the wake of a disappointing CPI report. The big guns were in no way immune either; shares of Amazon (AMZN), for instance, shed 5%, practically erasing all of the last week’s gains.
Stocks might be taking more punches in 2022’s brutal market, but according to Truist 5-star analyst Youssef Squali, in the real world, Amazon’s business appears to be performing pretty well – in North America, at least.
“We believe that the quarter is trending to the higher-end of expectations in the US, reflecting sustained demand driven by AMZN’s superior value proposition in this challenging environment,” Squali noted.
Despite a weakening macro, a “stickier Prime, sustained growth in AWS” and gains for its ad business are all helping Amazon push ahead.
Based on the investment firm’s proprietary CCRD data, Squali forecasts NA revenue in Q3 will increase by 20% from the same period last year to $78.3 billion, above consensus at $76.8 billion.
That said, Squali thinks total revenue will reach $126.7billion compared to management’s guidance of $125-130 billion and Wall Street’s call for $127.9 billion. This is due to “macro and FX headwinds,” impacting international revenue.
“The region is facing increasing inflationary pressure resulting from Russia’s decision to shut down the Nord Stream 1 Pipeline indefinitely,” Squali explained, “which we believe may adversely impact consumer activity in the region as a result of rising energy prices.”
The analyst sees this segment’s haul declining by 6% year-over-year to $27.4 billion compared to the Street’s prediction of $29.6 billion.
Elsewhere, Squali forecasts AWS revenue will rise by 30% year-over-year to $20.9 billion, more or less the same as consensus at $21.2 billion, while operating income is expected to hit $2.8 billion, a little below Wall Street’s prediction for $3.1 billion.
“On the bottom line,” Squali summed up, “inflationary pressures, productivity loss and fixed cost deleverage are starting to reverse, boding well for profitability N/M term.”
To this end, Squali reiterated a Buy rating on Amazon shares, while his $180 price target implies 12-month share appreciation of ~43%. (To watch Squali’s track record, click here)
The aggregated analyst reviews show us that Wall Street generally agrees with the bullish thesis here. Of the 38 most recent reviews, 37 are to Buy while only 1 says to Hold, for a Strong Buy consensus rating. AMZN is selling for $126.28 and its $177.05 average price target indicates a high 40% upside potential. (See Amazon stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
