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Amazon Stock Forecast: After poor earnings report, will Amazon sink further?

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Amazon announced a $10B shares repurchase plan. Amazon’s $10 billion stock purchase program shocked investors. Amazon has not repurchased shares significantly in the past. Even though $10 billion is less that 1% of the company’s market capitalization the program has long-term implications.
Amazon is expanding internationally and improving its distribution network. This will allow it to grow its ecommerce company. Its announcement of the first Australia-based sort centre is a clear example of this.
Amazon announced a 20 to 1 stock split on March 9th. A stock split will occur on June 6th. Stockholders of AMZN stock will receive 20x the number of shares that they had prior to the split. Assuming all other factors remain the same, the share price of AMZN stock will be one-twentieth that it was before splitting.
Amazon has been slowing down in recent years compared to the stock markets. An analyst recommends Amazon shares be bought at an overweight recommendation of “buy” with a price estimate around $4,200 per stock. It is still on the Top Pick stock lists of the investment bank. The target price would almost triple the stock’s current market price if it is reached.

Amazon reported a net loss $3.8 billion in its Q1 2022 earnings.
Zacks Investment analysts rate this stock as a buy for the short term.

Amazon Stock Forecast: Bull Case

Profitable Cloud Business – While Amazon Inc.’s major revenue source is e-commerce, Amazon Web Services (Amazon Web Services), is quickly gaining popularity and is now the most profitable business. AWS revenue for 2021 was $62.2 million, which is an increase by 37% YoY. It could soon grow to $100 billion in revenue.
Rivian, Meta, and Other Companies Form New Partnerships – AWS’s new line of customers, which includes Rivian (Under Armour), Goldman Sachs and Meta Platforms, is what builds confidence. It is clear that cloud-based businesses are in high demand. AWS is competing with Google. AWS had $18.5 billion of operating profit in 2021. This is a remarkable 37% increase YoY.
Advertising Sector – Next in line is Amazon’s advertising sector. Amazon has split advertising revenue for its first quarter. It posted $9.7 Billion in fourth quarter revenue, an increase 33% YoY. Amazon offers advertising services for a broad range of customers including customers, sellers, and suppliers. Amazon recently made a 11 year agreement with the NFL to broadcast Thursday Night Football. This can significantly increase revenue.

Strong Q4 Results – Wall Street analysts were cautious about Amazon’s February 3rd 2022 Q4 results. However, the company’s revenue has increased by $14.3 billion, more than twice its income in previous years. Unsurprisingly, Rivian Automotive, the company’s latest investment, was responsible for a large portion of Amazon’s $11.8 billion earnings. Amazon saw a 13.5% increase in its share price Friday, 04/02/2022. This was due to AWS and the profit-making advertising sector. Due to this gain, Amazon’s market value increased by $190 billion

Amazon Announces Increase in Prime Membership Fees in US The monthly fee went up from $12.99 to $14.99, while the annual fee increased from $119 to $139. While this will cause some loss in retention, Amazon already has more than 200,000,000 paid subscribers. Amazon is willing to take a small hit to get its core business on track.

Amazon stock price prediction: Best Case

Persistent Labour issues- Recently, Retail, Wholesale and Department Store Unions (RWDSU), charged Amazon with interfering illegally with the union election in Alabama. Amazon officials are accused of removing union literature from its breakroom and restricting access. This may be true, or false. However, these unfair treatment allegations against Amazon are not new. Amazon appears to be trying to prevent unionization and improve relations with labour. It could harm Amazon business in the future.
Lower Operating Margins in Ecommerce Business – Amazon’s e-commerce business generated $407 billion in revenue for the 2021 year. Despite good top line growth, the operating margin has fallen YoY. Operating margin was 3% in North America. This is 1% less than 2020. Supply chain disruptions and labour supply problems caused the decline in operating profits. These trends are expected to continue into 2022.
Declining Cash Flow – Amazon’s trailing 12 month cash flow fell 30% YoY to $46.3billion. In addition, free cash flow has fallen to negative $9.1billion for the past 2 years ended 31 December 2021. For the 12-month trailing ended 31/12/2021, free cash flow was positive at $31.0 billion

Amazon Stock Forecast: A plethora of growth possibilities in the near future

Amazon plans to create large chains of physical stores offline, and it is ready for battle with Walmart. This brightens the stock’s outlook for long term investments.
Amazon’s physical outlet stores will be opening in Ohio, California and are about one third of the size of regular Walmart stores. But it is still a long way before Amazon can make its mark.
Amazon announced a range of new electronic gadgets on the 28th September. These include smart displays and home robots.
Amazon’s first robot, Astro, will be a companion and security guard. It integrates artificial intelligence with computer vision, voice and edge computing.
Amazon is also tapping for $350 million in prescription drug market. Amazon Pharmacy, which it launched last year, was a disappointment for drugstores and whole sellers.
Expect the unit to offer an 80 percent discount on generic medications and a 40 percent discount on brand medication.

Amazon Stock Forecast

Amazon’s core ecommerce business is facing difficulties because of inflation fears and labor problems in North America. What is even more disturbing is the inaction of Amazon management to resolve these labor problems, or at least get them noticed by the media. Covid 19 supply chain disruptions that could result in supply chain disruptions should continue at least through 2022. We have little hope for online sales going forward.

Amazon Inc’s success is due to its ability to diversify and make it profitable in many verticals. AWS and advertising are just two examples. Rivian Automotive’s investment is finally paying off.

Interesting fact: Amazon Inc. historically traded between 20 and 35 cash from operations per share. A projected price of $4750 can be calculated by applying a modest 25-multiples of the $190 consensus estimate for 2023.

Amazon may not be able to sustain its current volatility in 2022’s bear market, but it does offer an opportunity for investors to invest in bluechip stocks over the long term. The company is diversifying in all possible fields to increase its profitability.