Yahoo Finanza Why Amazon Stock Is Under Pressure Today
Amazon Stock Falls After Morgan Stanley Cuts Its Price Target
Amazon shares found themselves under pressure after Morgan Stanley cut its price forecast for the stock from $4,300 to $4,100 due to the negative impact of rising wages. Similar concerns have recently pushed FedEx stock to yearly lows.
The holiday season is in sight, and it is already clear that companies will have to compete for workforce, which will push wages higher and put pressure on their financial results.
Currently, analysts expect that Amazon will report earnings of $53.25 per share in the current year and $67.06 per share in the next year, so the stock is trading at 50 forward P/E.
While Amazon investors are used to high multiples, it should be noted that earnings estimates have been moving lower in recent months, which is not great for a stock that trades at such a high valuation.
What’s Next For Amazon Stock?
Amazon stock is up by just 3% year-to-date, so the stock significantly underperforms S&P 500, which is up by almost 19% year-to-date. Amazon shares had a great 2020 as pandemic fueled demand for company’s services, but this year is more challenging as investors begin to question whether company’s valuation is justified by earnings estimates.
Current concerns about the negative impact of higher wages may put additional pressure on the stock in the near term, although this pressure should not be as strong as in the case of FedEx.
In the longer-term, Amazon’s rich valuation presents the biggest risk for the stock. At current levels, Amazon is valued at roughly $1.7 trillion, and it remains to be seen whether the company of this size can grow fast enough to justify trading at 50 forward P/E. At this point, Amazon clearly needs additional catalysts to get back to the upside trend.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
