Amazon Stock Price Forecast November 2021 – Time to Buy AMZN Stock?

With a YTD (year-to-date) gain of only about 9%, Amazon (AMZN) stock is the worst performing FAANG stock of 2021. Alphabet is the best performing FAANG stock and its market cap briefly topped $2 trillion. Apple and Microsoft are the other two US companies with a market cap of over $2 trillion.

Meanwhile, Amazon stock has sagged amid concerns over slowing growth and supply chain issues. Also, the company is facing higher wage costs amid the crippling labor shortage situation in the US. Meanwhile, the retail spending environment in the US is looking quite strong and all the retail companies, including Walmart and Target, have reported better than expected earnings this week. What’s the forecast for Amazon stock and is the recent weakness a good buying opportunity?

Amazon’s third-quarter earnings missed estimates

The third-quarter earnings season was a mixed bag for Big Tech companies. While Alphabet, Facebook, and Netflix reported better than expected earnings, Apple and Amazon missed estimates. For Amazon, it was the second consecutive quarter of sales miss and its third-quarter revenues of $110.81 were below the $111.6 billion that analysts were expecting. The company had previously posted a sales beat for three years. In the third quarter of 2021, Amazon’s adjusted EPS of $6.12 was also way below the $8.92 that analysts were expecting.

AMZN gave dismal guidance

The company gave fourth-quarter revenue guidance of $130-$140 billion, which was below the $142.1 billion that analysts were expecting. The company’s operating profit guidance of $0-$3 billion was even more concerning and points to several headwinds. Andy Jassy, Amazon’s CEO said “In the fourth quarter, we expect to incur several billion dollars of additional costs in our Consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs.”

He, however, added, “It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.” Notably, retail companies have been grappling with a severe supply chain shortage heading into the holiday season.

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Amazon stock forecast

While there are concerns over slowing growth and high labor costs, some analysts believe that the concerns are overblown. Goldman tech analysts led by Eric Sheridan are bullish on Amazon stock and added the stock to their top picks for 2022.

“We view this recent EPS report as fully reflective of investor concerns on both revenues & profitability into 2022 (with AMZN exposed to a multitude of broader secular growth themes incl. eComm, advertising, cloud computing, media consumption & consumer subscription adoption),” Goldman Sachs said in its note.

AMZN stock long term forecast

The long-term forecast for Amazon stock looks positive. Goldman Sachs is of the view that the current investments that Amazon is making would only cement its position in the e-commerce market.

The shift towards e-commerce and cloud will only accelerate in the coming years as the digital transformation continues. Amazon has a market-leading position in both these industries. The stock also forms part of Berkshire Hathaway’s portfolio and chairman Warren Buffett regrets missing the stock in its early days. Over the long term, international operations would drive the growth for Amazon. The company already has a strong position in India where it competes with Walmart-owned Flipkart.

AMZN stock target price

Wall Street analysts are bullish on AMZN stock. Of the 50 analysts polled by CNN Business, 47 rate the stock as a buy while three rate it as a hold. None of the analysts have a sell or equivalent rating on the stock.

Its median target price of $4,000 implies an upside of 12.7% over current prices. Its lowest target price is $3,473 which is a discount of 2% while the highest target price of $5,000 is a premium of 40.9% over current prices. After the company’s third-quarter earnings release, several analysts had lowered their target prices on the stock. However, most of them maintained their ratings. We saw something similar after Amazon’s second-quarter earnings release also where many analysts lowered AMZN’s target price while maintaining their buy rating.

Should you buy Amazon stock?

Amazon is going through short-term pain. Firstly, it is facing unfavorable YoY comparisons. As the physical stores have reopened, Amazon is having trouble repeating last year’s growth. Also, it is facing short-term headwinds from higher wage costs and supply chain issues. That said, these issues don’t mask the company’s positive long-term forecast.

Earlier this month, Loop reiterated AMZN as a buy while pointing to these short-term issues. It said, “Amazon’s 3Q 2021 results and 4Q 2021 guidance came up short of our expectations, particularly from a profitability perspective. That said, we believe top-line growth deceleration was largely expected given the “normalization” of global consumer shopping and spending patterns, and note the company has several levers to pull to improve profitability.”

Amazon stock is also looking bullish on the charts and has risen above the 50-day, 100-day, and 200-day SMA. The stock is looking at a breakout which could take it higher from these levels. Its 14-day RSI (relative strength index) is 60, which is a neutral indicator.

AMZN trades at an NTM (next-12 months) PE multiple of 87x. The multiple has expanded over the last month as analysts lowered the company’s earnings estimates. However, the long-term growth story looks intact and Amazon stock looks a good buy at these prices.

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