What happened
Shares of e-commerce and cloud computing kingpin Amazon (NASDAQ: AMZN) slumped on Tuesday, shedding as much as 2.8%. As of 2:45 p.m. ET, the stock was still down 2.3%.
The downtrend in the overall market no doubt helped to push Amazon stock lower, but mixed commentary by one of Wall Street's finest likely added fuel to the sell-off.
So what
J.P. Morgan analyst Doug Anmuth cited several near-term headwinds as he trimmed his expectations for Amazon's first-quarter revenue and full-year earnings per share guidance, even as the company performed well during the recent holiday sales season. Anmuth mentioned inflationary pressures, as well as elevated operational and labor costs, as potentially weighing on Amazon's results.
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Anmuth now expects first-quarter revenue of $120.5 billion, while simultaneously lowering his earnings per share guidance for the full year to $75.17, down from $79.47.
That said, he believes these more realistic expectations will help investors as we embark on a new year. "Though our estimates come down, we believe lower expectations should help de-risk shares and [Amazon] will become a cleaner story to own through 2022," Anmuth wrote in a note to clients.
Now what
Anmuth also cited a number of potential catalysts that could boost Amazon's results. He suggested the company could increase sales of apparel, groceries, and accessories, as well as gaining share in furniture and appliances. Additionally, the company recently increased its fulfillment fees by about 5%, a move that Anmuth believes could add as much as $3 billion to revenue over the coming year.
It's worth noting that even though Anmuth reduced his near-term expectations, Amazon remains the investment bank's top pick overall. Anmuth reiterated his overweight (buy) rating, with a price target of $4,350. His price estimate would represent potential upside for investors of more than 34% over the coming year, compared with the stock's closing price on Friday.
Amazon hasn't yet confirmed the date of its fourth-quarter and full-year earnings release, but market watchers are expecting the results sometime during the first week of February.
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