Should you buy or sell AMZN shares? Morgan Stanley just lowered the price target

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 27, 2021
  • Morgan Stanley on Monday lowered its price target for Amazon shares to $4,100 from $4,300.
  • Analyst Brian Nowak expects AMZN labour costs to rise significantly in 2021 and 2021.
  • Its logistics workforce rose to 700,000 up from 500,000 this year, while wage rate and benefits are also up.

On Monday, Morgan Stanley analysts lowered Amazon.com Inc. (NASDAQ:AMZN) stock price target to $4,100 from $4,300, triggering a 1.39% decline in the stock price. 

Analyst Brian Nowak cited the company’s rising logistics workforce and higher wage rate and benefits for the reduced PT.

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Amazon’s logistics workforce increased by 200,000 this year, while the hourly wage rate and benefits are up by $3.00 to $21.88, from $18.88. As a result, the analyst forecasts labour costs rising by about $4 billion, approximately 60% in Q4, compared to the same quarter a year ago.

Thus, the firm lowered its forecast AMZN EBIT by 16% in 2021 and 19% in 2022.

Amazon is still a solid buy despite the reduced price target

Although the analyst reduced the AMZN price target by $200.00, the current PT of $4,100 still implies an upside potential of more than 21% based on the price (as of this writing) of $3,378.

Moreover, although Amazon shares trade at a steep P/E ratio of about 59.70, thereby making the stock less attractive to value investors, analysts expect its earnings per share to rise by 81.90% this year before growing at an average annual rate of 35.77% over the next five years.

Therefore, Amazon is still one of the best high-growth stocks in the market despite its mega-cap valuation.

Source – TradingView

Technically, the AMZN stock appears to have recently pulled back to trade below the 100-day moving average. Although the stock is yet to reach oversold conditions of the 14-day RSI, the moving average indicator could still trigger a rebound as it has done previously.

Therefore, the Amazon stock price appears pinned in a tussle between the bulls and the bears, with investors looking to buy holding a slight advantage. As a result, they could target rebound profits at $3,494 or higher at $3,631. 

On the other hand, investors that expect the pullback to continue can target downward profits at $3,302 or lower at $3,174.

Bottom line: It could be time to target the AMZN rebound

In summary, although Amazon shares seem potentially overvalued based on the P/E ratio, its prospective earnings growth makes it an exciting stock to add to your portfolio. 

Therefore, Monday’s pullback could be an opportunity to buy.

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