After two years of unanimous buy ratings, bearishness has reached Amazon (AMZN). First, we had BNP Paribas’s sell recommendation. Now we have a "hold" rating from Rosenblatt Securities analyst Barton Crockett.
Along with the hold, Crockett has assigned AMZN a $3,000 price target.
With other analysts calling Amazon 2022's ultimate internet stock, who's right? Will inflation loosen Amazon's long-lasting hold on the online retail industry?
E-commerce: The Reason to Sell
Rosenblatt Securities believes Amazon won’t be able to stand its ground against continuing inflation. Crockett’s main argument lies in the fact that retail is a very competitive industry with much constrained margins that make it impossible for any of the players to roll price increases over to consumers.
Although I personally agree that inflation will trim Amazon’s profitability, I don’t believe competition will play a decisive role in the process, for two main reasons:
- Amazon’s competitors will also struggle because of inflation. And they will bleed even more because they do not possess a business unit like Amazon Web Services (AWS) to compensate for their losses.
- Amazon has already proven its ecosystem works in terms of locking customers in. The company had 37% of the U.S. e-commerce market in 2017. That number was 41%, in 2021.