Amazon: Could Growth Accelerate in 2022?

Amazon stock underperformed the market averages in 2021. It inched up 2.4% compared to a 29% increase in the Nasdaq 100 Index in 2021. 

Amazon’s (NASDAQ:AMZN) underperformance is due to several factors. Profit-taking post the stellar appreciation in its stock price and difficult year-over-year comparisons, especially in the first half of the year, remained a drag. 

Further, increased costs related to labor and supply-chain disruptions weighed on its margins, and in turn, its stock price. 

Amazon expects material cost inflation, wage increases, and labor-related productivity losses to impact its cost structure and margins in Q4. 

Given the softness in sales and pressure on margins, investors have been selling Amazon stock. TipRanks’ Stock Investors tool shows that about 1.1% of investors holding portfolios on TipRanks have decreased their exposure to AMZN stock in the last 30 days. 

What’s Ahead?

Brian White of Monness remains upbeat about Amazon’s prospects in 2022. White expects Amazon to deliver double-digit revenue growth in the 2H22. Notably, Amazon faces easier year-over-year comparisons for its e-commerce business in 2H22. 

Further, White remains positive on the recovery in AWS (Amazon Web Services) revenues. He noted that “revenue growth at AWS was on the mend, resulting in three consecutive quarters of accelerating growth for the cloud service.” 

It’s worth noting that Amazon’s AWS revenue growth rate accelerated on a quarter-over-quarter basis. AWS sales marked 33%, 37%, and 39% growth, respectively, in the first three quarters of 2021. 

White added, “Amazon is uniquely positioned to emerge from this crisis as one of the biggest beneficiaries of accelerated digital transformation.” 

Along with White, Oliver Hu of Guggenheim is positive on Amazon and expects its market share gains to accelerate again by mid-FY22. Hu’s bullish outlook is based “on the potential for a significant positive inflection in early/mid 2022,” compared to the current moderating sales and margin trends. 

Wall Street’s Take

Besides White and Hu, Wall Street analysts maintain a favorable outlook on Amazon stock. AMZN’s Strong Buy rating consensus is based on 30 positive analyst reviews. 

Further, the average Amazon price target of $4,127.50 implies 21.1% upside potential to current levels.

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Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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