Investor sentiment regarding Amazon (AMZN) reflects growing caution ahead of its first-quarter earnings release. Operational challenges, including trade policies implemented under President Donald Trump’s administration, have led analysts to reconsider near-term prospects, even acknowledging strong areas such as artificial intelligence.
In response, Raymond James adjusted its position on Amazon. Analyst Josh Beck lowered the stock’s rating from ‘Strong Buy’ to ‘Outperform’ and significantly reduced the price target to $195, down from the previous $275. Beck noted that while long-term initiatives, particularly in AI, remain attractive, short-term risks make it difficult to maintain the highest rating.
Operational Pressures Mount
The downgrade is largely driven by increasing operational pressures. Tariffs imposed during the Trump administration affect both operating costs and strategies for diversifying logistics. Amazon’s substantial dependence on China, which accounts for approximately 30% of its gross merchandise volume, increases its susceptibility to trade friction and potential cost increases. Furthermore, ongoing efforts to restructure logistics are expected to temporarily impact profit margins, adding complexity within its Delivery Service Partners (DSP) network, which handles a significant portion of shipping, especially to rural areas in the US (around 11% of shipments).
Advertising Revenue Headwinds
Beyond its core e-commerce and logistics segments, Amazon’s significant advertising business also faces external pressures. Raymond James estimates that roughly 15% of the advertisements displayed on the platform are connected to Chinese products. This percentage is notably higher than the estimated 11% for Meta Platforms, presenting an additional vulnerability if trade policies evolve further or if retaliatory actions impact ad visibility and overall profitability.
Market Performance and Outlook
This more conservative analytical perspective comes amid recent weakness in Amazon’s stock performance, which saw a more than 5% decline in April, contributing to a year-to-date drop of 21.3%. Investors are now eagerly awaiting the company’s first-quarter financial results, anticipated on May 1st. Market observers will closely watch not only the key revenue and profit figures but also the company’s forward guidance regarding critical areas such as margins, advancements in AI, and ongoing modifications to its global logistics model. Despite these highlighted near-term risks, Raymond James maintains a positive long-term view on Amazon’s strategic initiatives, particularly its investments in artificial intelligence.
Maxwell Reed is the first editor of Cryptovista360. He loves technology and finance, which led him to crypto. With a background in computer science and journalism, he simplifies digital currency complexities with storytelling and humor. Maxwell began following crypto early, staying updated with blockchain trends. He enjoys coffee, exploring tech, and discussing finance’s future. His motto: “Stay curious and keep learning.” Enjoy the journey with us!