On Monday, Morgan Stanley analysts lowered Amazon.com Inc. (NASDAQ:AMZN) stock price target to $4,100 from $4,300, triggering a 1.39% decline in the stock price.
Analyst Brian Nowak cited the company’s rising logistics workforce and higher wage rate and benefits for the reduced PT.
Amazon’s logistics workforce increased by 200,000 this year, while the hourly wage rate and benefits are up by $3.00 to $21.88, from $18.88. As a result, the analyst forecasts labour costs rising by about $4 billion, approximately 60% in Q4, compared to the same quarter a year ago.
Thus, the firm lowered its forecast AMZN EBIT by 16% in 2021 and 19% in 2022.
Amazon is still a solid buy despite the reduced price target
Although the analyst reduced the AMZN price target by $200.00, the current PT of $4,100 still implies an upside potential of more than 21% based on the price (as of this writing) of $3,378.
Moreover, although Amazon shares trade at a steep P/E ratio of about 59.70, thereby making the stock less attractive to value investors, analysts expect its earnings per share to rise by 81.90% this year before growing at an average annual rate of 35.77% over the next five years.
Therefore, Amazon is still one of the best high-growth stocks in the market despite its mega-cap valuation.
Source – TradingView
Technically, the AMZN stock appears to have recently pulled back to trade below the 100-day moving average. Although the stock is yet to reach oversold conditions of the 14-day RSI, the moving average indicator could still trigger a rebound as it has done previously.
Therefore, the Amazon stock price appears pinned in a tussle between the bulls and the bears, with investors looking to buy holding a slight advantage. As a result, they could target rebound profits at $3,494 or higher at $3,631.
On the other hand, investors that expect the pullback to continue can target downward profits at $3,302 or lower at $3,174.
Bottom line: It could be time to target the AMZN rebound
In summary, although Amazon shares seem potentially overvalued based on the P/E ratio, its prospective earnings growth makes it an exciting stock to add to your portfolio.
Therefore, Monday’s pullback could be an opportunity to buy.
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