Amazon has disappointed investors this year with slower revenue growth amid a high base and deteriorating macro factors, as well as a slump in profitability: operating income has fallen due to lower productivity amid aggressive growth the past two years.
Rivian Automotive’s net income has also come under pressure from the impairment of its investment. Future prospects for Amazon stock price prediction today depend on the success of cost control and profitability improvement initiatives. We encourage you to follow the company’s news at letizo.com.
Amazon’s December 2023 stock price target is $99.24, which implies a downside of 1.5% from current levels. Based on the potential, we reiterate a “Hold” rating.
Amazon is one of the largest e-commerce sellers in the world. The company sells its own products and provides services to third-party sellers to sell their goods. Amazon is also a major player in cloud solutions, owns the popular streaming platform Twitch, creates its own electronics, and makes shows and movies for its Amazon Prime Videos subscription service.
The long-term outlook for Amazon stock price after hours today looks good: the company relies on several sources of revenue, including high-margin IT services and advertising. However, falling profitability and negative free cash flow limit the stock’s near-term upside potential.
Amazon stock price prediction today — the company’s outlook
Since the beginning of the year, Amazon stock has collapsed 40%, while the market has averaged a 16% decline and the discretionary sector has declined 29%.
Amazon’s long-term growth and profitability is paramount to management, meaning that quarterly results can be “sacrificed” to meet long-term goals. Investing in prospects and maintaining leadership is positive for the company’s prospects over the long horizon, but comes at a price and puts pressure on quarterly results and capitalization.
Risks
Capital dilution. Amazon uses stock as a tool to motivate employees; paying out such compensation leads to dilution of equity. Diluted number of shares including stock options in Q3 increased to 10,331 million from 10,309 million a year ago.
High competition
- In retail, Amazon competes with large traditional retailers, developing their own online channels (for example, Walmart) and specialized marketplaces (for example, ASOS for clothing).
- Also, the promising segment of IT services, AWS is not the only player in the market. Google Cloud and Microsoft Azure are competing for big and large customers.
- Declining purchasing power. Because of increased consumer inflation, customers may switch to alternative sellers such as one-price stores or discounters, and abandon entertainment services (online movie theaters, audio books).
Labor costs. Amazon is one of the largest employers in the world, hiring about 1.5 million people. Although the company does not disclose the amount of labor costs, they probably account for a significant share of operating expenses. Rising nominal wages amid a strong labor market are reflected in higher costs. That may be why Facebook stock price history is worth considering for investment.
Technical Analysis
On the weekly chart, Amazon stock broke its long-term uptrend but found support around $85, where the stock traded in 2019. The first strong resistance level will be the uptrend around $110, and if it is broken, the stock could be on its way to $120. On a pullback, the stock could fall to $66. By the way, a similar picture was observed on Facebook stock yesterday.
