Retailers Opt Out of Amazon's Prime Day Sales Event; Question Arises: Should Investors Abandon AMZN Shares?
Amazon's Empire Troubled by Hefty Tariffs and Cautious Sellers
In the world of e-commerce, the mighty Amazon.com, Inc. (AMZN) has faced a tumultuous ride over the past few months, with its stock nose-diving 21% amid escalating trade tensions. President Trump's tariffs have takes a heavy toll on Amazon's third-party sellers, squeezing profits like never before. And with Prime Day 2025 just around the corner, many sellers are hitting the brakes on their bargain-bin enthusiasm.
Prime Day, Amazon's flagship retail event, depends on deep discounts and high volume, but these discounts often slash merchants' profits even on a good day. The addition of sky-high tariffs makes the math far less enticing for many sellers, who feel like they're swimming against the tide. While Amazon is backed by China-made goods, higher costs might mean fewer deals, fewer sales, and a less sparkly Prime Day feel.
As sellers grapple with the decision to hang in there or bow out, investors must contemplate whether AMZN stock remains a wise investment.
Do You Need Billions to Own a Piece of the Action? Think Again.
Voices from the venture capital world whisper that companies like Discord or Perplexity are within reach, without breaking the bank. Although Amazon commands a trillion-dollar market cap, casual investors can still get a foot in the door.
What's Next for the Empire?
With Prime Day merchants treading cautiously, and spending on the rise, the question arises: Is it time for investors to reconsider AMZN stock as a safe bet?
Armed with a $4 billion investment in small-town deliveries and earnings due out this week (May 1), Amazon seems unfazed by the market pessimism. Only time will tell if this investment marks a clever retrenchment or a risky gamble.
A Brief Overview of Amazon Stock
Washington-born Amazon.com, Inc., founded by Jeff Bezos in 1994, has reigned supreme in U.S. e-commerce, claiming a whopping 38% share. Amazon Web Services (AWS) fuels the global cloud infrastructure, while Prime Video and healthcare innovations steer industries left and right.
Since a decade-long stock surge of 788%, AMZN stock has positioned itself as a mega-cap force, transforming the digital age. However, 2025 has brought rough waters, with the stock down 15.9% on a year-to-date basis and 24% below its February peak of $242.52.
Despite this rocky start, bargain-hunters see an opportunity. Currently trading at 30.17 times forward adjusted earnings and 3.14 times forward sales, AMZN boasts discounted multiples compared to its five-year average. It could be the perfect storm before the next Prime-fueled breakout.
Amazon's Q4 Earnings: A Mixed Bag
Amazon claimed stronger-than-expected Q4 earnings on February 6, but the stock took a dive as investors reacted to weak guidance. Revenues jumped 10% year over year to $187.8 billion, while adjusted EPS nearly doubled to $1.86, outdoing projections by 22.4%. The key players behind this success were streamlined operations and rising margins across segments.
The cloud cornerstone, AWS, scored a 19% revenue increase to $28.8 billion, while digital advertising shone at $17.3 billion, up 18%. Averaged free cash flow swelled to $38.2 billion, empowering AI ventures and acquisition sprees. With $78.8 billion in cash and cash equivalents, Amazon's shift towards regional deliveries fortified its logistics power, chopping costs, speeding deliveries, and solidifying retail dominance.
Despite these impressive results, Amazon's shares dipped 4.1% on February 7, spooked by tempered Q1 guidance and AWS growth concerns. For this week's report, management expects Q1 revenue to land between $151 billion and $155.5 billion, with operating income ranging from $14 billion to $18 billion.
Analysts forecast $155.1 billion in revenue and a Q1 EPS surge of 19.5% to $1.35, but tariffs have lit shareholder anxiety. Long-term, analysts anticipate fiscal 2025 profit to hit $6.20 per share, up 12.1% year over year, and grow another 15.2% to $7.14 per share in fiscal 2026.
Tariffs: The Storm Cloud Hanging Over Amazon
Smack in the middle of the trade tensions storm, Amazon is bearing the brunt of the pressure. Not only are some sellers skipping Prime Day, but sellers – particularly those based in China – are hustling to find cheaper suppliers or raising prices due to inflation fears. Market skirmishes have left AMZN stock battered, bruised, and in search of relief.
Although tariffs are causing shoppers to balk, Amazon's cloud gem, AWS, continues to dazzle with billions in operating income and high margins. The company's diversified business model, encompassing everything from cloud services to AI, gives it a measure of resilience against short-term challenges. And with a healthy war chest, Amazon can withstand any storm and capitalize on the burgeoning e-commerce sector. Investors would be wise to keep their eye on the long-term horizon and remember Amazon's determinative power in this ever-transforming tech landscape.
Analysts' Driving Directions for Amazon Stock
Indeed, the tech titan faces significant risks if U.S.-China tensions prompt a broader economic downturn, chilling consumer spending and business investment. Still, CFRA's Arun Sundaram believes Amazon can weather this tariff tempest, though with some wounds. As sellers tighten their belts and waffle on Prime Day deals, Amazon remains unfazed, thanks to strong partner interest.
Analysts have dampened their expectations for Amazon, worrying about the impact of tariffs on e-commerce sales and ad revenue. Oppenheimer has reduced its price target from $260 to $220, but still maintains an "Outperform" rating, trusting that AWS's growth can keep investors interested. Overall, AMZN has a "Strong Buy" consensus, with 46 out of 52 analysts recommending a "Strong Buy," 5 suggesting a "Moderate Buy," and just 1 issuing a "Hold." The mean price target of $246.43 hints at an upside potential of 33.6% from the current price levels.
Stock information accurate as of the date of publication. The author owns no positions in any of the securities mentioned in this article.
- Despite escalating trade tensions and the impact of tariffs on Amazon's third-party sellers, some investors still see AMZN stock as a potential wise investment.
- In the world of venture capital, it has been indicated that companies like Discord or Perplexity could be within reach for casual investors, even with Amazon's trillion-dollar market cap.
- With Prime Day merchants treading cautiously amid rising spending, investors may be reconsidering AMZN stock as a safe bet, given the adjustments in sales and discounts.
- Although the tariffs are causing concerns for Amazon, its diversified business model, including cloud services, artificial intelligence, and strong partners' interest, provide a measure of resilience against short-term challenges.
