Nasdaq AMZN Amazon

Electric vehicle start-up stocks seem to be following the same playbook over and over with investors. Tesla has had a decade-long head start forging a path for EV companies, but its success has led to investors wanting to find the next Tesla in names like Rivian Automotive (NASDA

Amazon (NASDAQ:AMZN) stock hasn’t had much of a run over the past year. A deceleration in growth, cost inflation, and labor constraints have restricted the upside potential for the stock. 

Given the challenges, Amazon's stock is up about 6% over the past year compared to more than 9% growth in the Nasdaq 100 Index.

What’s Ahead?

While Amazon underperformed the benchmark index, cost headwinds could continue to hurt its financials in Q1. However, this shouldn’t worry investors as these negatives are already reflected in the stock price. 

Further, Amazon’s CFO Brian Olsavsky sees things improving as the year progresses. Also, he is optimistic about the fundamentals of the retail business and innovation pipeline. Notably, Amazon announced that it would increase its Prime membership fee in Q1, which will support its subscription revenues and margins amid increasing costs. Further, the ongoing strength in its high-margin AWS business is positive.

Along with Olsavsky, Guggenheim analyst Seth Sigman also maintains a positive view of Amazon’s prospects in 2022. The analyst stated, “Our positive view on AMZN in 2022 has centered on the potential inflection in its retail business along with the related improvement in operating leverage, acceleration in advertising, and support from AWS.”

Sigman added that trends in Q1 have improved compared to the previous quarter. Further, he expects Amazon to “navigate macro factors” well. Sigman has a Buy recommendation on AMZN stock with a price target of $4,300, translating into 31.4% upside potential.

Bottom Line

Amazon’s problems are transitory, and the pressure on its margins is expected to ease. Further, strength in the AWS business, the Prime membership fee hike, and a ramp-up in advertising will likely support growth. 

Amazon stock has received 34 Buy and one Sell recommendations for a Strong Buy consensus rating. Further, AMZN has a maximum Smart Score rating of 10 out of 10, according to TipRanks’ data-driven stock score. Further, the average Amazon price target of $4,143.76 implies 26.7% upside potential to current levels.

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