Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Amazon Stock: Headed to $4,100?

By Daniel Sparks - Sep 28, 2021 at 7:05AM

Key Points

  • Most analysts think Amazon shares will trade at a price above $4,100 12 months from now.
  • One analyst is cutting his price target for the stock, citing growing wages costs for the company.
  • Over the long haul, analaysts expect Amazon's earnings to soar.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Even one analyst's lowered price target for the growth stock still represents a bullish view.

Shares of Amazon ( AMZN -0.18% ) fell a few percentage points on Monday morning, following an analyst's move to cut his price target for the stock. Interestingly, however, the analyst's lowered price target for shares still represents significant upside from where the stock is trading today, illustrating how bullish some analysts are on the company. Indeed, even after this analyst lowered his price target, he is still maintaining an overweight rating on shares (the equivalent of a buy rating). Further, the last six analysts to rate the stock have given it buy ratings (or an equivalent of some sort).

Here's a look at how even a downgraded outlook for Amazon stock from one analyst is still a bullish one.

Amazon employee with box in an Amazon fulfillment center

Image source:

Rising wages could weigh on near-term profitability

Morgan Stanley analyst Brian Nowak lowered its 12-month price target for Amazon stock from $4,300 to $4,100 on Monday. Though he reiterated an overweight rating for shares, which currently trade at about $3,350. The price target represents more than 20% upside.

The lowered view for shares reflects the analysts' concerns about growing warehouse and logistics headcount and the company's move to increase wages for these employees. Aggressive hiring efforts and increasing wages led Nowak to trim his forecast for 2021 and 2022 earnings before interest and taxes. Challenging near-term profitability headwinds could make prevent shares from rising until revenue growth reaccelerates in the second half of next year, the analyst says. 

The long game is what counts

But investors should read in between the lines. The analyst also says in the note that the company's expanded logistics operations will ultimately help Amazon improve shipping speeds, gain market share, and create new business opportunities. In other words, this is a classic Amazon move: sacrifice profits today in the name of a more powerful business in the long term. By hiring aggressively and paying its workforce better, the company is ultimately strengthening its competitive position.

Nowak's lowered price target for Amazon shares comes at a time that many analysts are bullish on the growth stock. Indeed, the average price target for Amazon stock is actually higher than Nowak's -- at $4,157. 

Analysts have good reason to be optimistic about Amazon's long-term prospects. The e-commerce giant's revenue has been growing rapidly and its operating margin has been steadily improving on a trailing-12-month basis.

Investors may do better to avoid worrying about any short-term predictions about Amazon shares and instead focus on the company's long-term prospects, which remain very promising. As the company benefits from operating leverage, the consensus analyst forecast currently calls for the e-commerce giant's earnings per share to explode over the next five years, rising 36% annually. This would easily justify the stock's current valuation.

Of course, investors shouldn't rely on analyst price targets to make their investment decisions. Instead, they should base decisions on their own due diligence. Nevertheless, it's telling that even an analyst downgrade for Amazon stock is still bullish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned, Inc. Stock Quote, Inc.
$3,437.36 (-0.18%) $-6.36
Morgan Stanley Stock Quote
Morgan Stanley
$98.86 (3.78%) $3.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.