Why Amazon Stock Beat the Market on Friday

  1. What happened

Actions of Amazon (AMZN 0.25%) rose on Friday, adding as much as 2.4%. As of 11:57 a.m. ET, the stock was still up 0.3%, despite the broader market being underwater.

The catalyst that gave the e-commerce provider a boost was a positive comment from a Wall Street analyst.

So what

citi Analyst Ronald Josey took a glass-half-full approach to Amazon’s future potential. Despite removing the company from Citi’s focus list, the analyst believes any risk to the stock is already priced in, particularly for long-term investors. He highlighted Amazon’s share price, which has fallen more than 42% from its recent high.

Image source: Getty Images.

Josey believes that Amazon Prime Day, which is expected to take place in July, could help Amazon capture a larger share of retail sales, especially given rampant inflation and the potential for a full-blown recession. Furthermore, Amazon’s growth has slowed to a crawl, as a result of last year’s harsh trade-offs, which the analyst noted will taper off in the second half of 2022.

Now what

A look at recent results from Amazon suggests the analyst is on to something. During the first quarter, Amazon’s online retail sales (excluding its services, cloud, and ad revenue) grew just 3% year over year, but that was on top of gains of 46% during the same period last year. last.

To give those numbers context, Amazon increased e-commerce sales by 23% year-over-year in the third quarter of 2021, while online retail declined nearly 6% in the fourth quarter.

This suggests that compensation related to the pandemic will, in fact, decline over the course of the next year. Additionally, Amazon has frequently broken online sales records with its Prime Day sale, which the company refers to as “Christmas in July.”

The massive acceleration of e-commerce adoption that accompanied the pandemic was always going to taper off, giving way to more normalized growth. That said, given Amazon’s industry-leading position, ongoing secular tailwinds, and the huge opportunity ahead for e-commerce, Amazon is a buy, especially for investors with a long-term perspective.

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