Amazon (NASDAQ:AMZN) is not safe from softening consumer spending trends, Citi says.
The New York-based bank indicated that while it still believes in the eCommerce and cloud giant, the recent slide for shares and growing inflation concerns prompted some reflection.
“Given macro uncertainty and lack of near-term catalysts, we are removing Amazon from Citi’s NAM Focus List,” a note released on Friday morning reads.
The bank’s analyst Ronald Josey added that a weaker consumer in a more challenged macro environment could meaningfully impact earnings moving forward. Even Amazon (AMZN), he advised, will not be able to completely avoid the changing dynamics in consumer discretionary spending.
Still, the Seattle-based behemoth remains a top pick for the internet sector and remains “Buy” rated at the bank. Josey indicated that while the removal from a “Focus List” indicates some trepidation, it does not break the overall bullish thesis on the stock. Indeed, the troubled consumer could prove positive for Amazon (AMZN) in his view.
“We believe Amazon remains relatively well positioned to reaccelerate retail growth in [the second half of 2022] and we view July’s Prime Day and the upcoming Back-to-School and Holiday shopping seasons as core catalysts, particularly as comps get significantly easier beginning in [the third quarter] on what we believe are modest expectations,” Josey wrote. “To the extent other retailers pass on inflationary costs and fees to consumers via higher pricing, we believe Amazon is likely to follow to remain competitive on prices overall.”
As a result of these encouraging dynamics, Josey indicated the current post-plunge entry point is quite promising even if there might be short-term pain.
“We believe much of the risk is priced in, particularly for longer-term investors,” he wrote to clients, reiterating a $4,100 price target for shares.
Shares of Amazon (AMZN) accelerated 1.78% to the upside 90 minutes prior to Friday's market open.
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