The Amazon stock chart shows that 2021 has been a lukewarm year for its shareholders. Amazon (NASDAQ:AMZN) stock has risen about 8.2% year-to-date compared to a 24% increase in the Nasdaq composite index over the same period.
It’s worth noting that Amazon stock has some negative indicators from hedge fund managers and investors.
TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds have offloaded 576.2K AMZN shares in the last three months.
Meanwhile, TipRanks’ Stock Investors tool shows that about 4.4% of the investors who hold portfolios on TipRanks have lowered their exposure to Amazon stock over the past month.
What Went Wrong?
While Amazon continued to expand, the stock’s underperformance can be partially attributed to profit-taking. Furthermore, pressure on margins from higher costs stemming from supply-chain disruptions and a tight labor market remained a drag.
Amazon’s CFO, Brian Olsavsky, stated that the “cost of labor, labor-related productivity losses, and cost inflation” added about $2 billion to the operating costs in Q3. Moreover, he expects these costs to amount to $4 billion in Q4.
Could 2022 be Different?
Guggenheim analyst Oliver Hu expects Amazon’s margins to bottom in the first half of 2022. He expects Amazon to lap the higher costs from this year in 1H22 and sees an acceleration in the high-margin business, including AWS (Amazon Web Services) and advertising.
Further, Hu expects “online penetration growth re-accelerating and retail traffic recovery normalizing early in FY22,” which could lead to a re-acceleration in Amazon’s market share gains.
Hu has a Buy rating on Amazon stock with a price target of $4,300 (22.1% upside potential).
To see what the TipRanks community feels about AMZN’s future prospects, check out our Amazon stock discussion forum.
Wall Street’s Take
Along with Hu, Wall Street analysts maintain a bullish outlook on Amazon stock. AMZN stock has received 30 positive analyst reviews for a unanimous Strong Buy consensus rating. The average Amazon price target of $4,120.83 implies 17% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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