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  • Writer's pictureSarah Dixon

Amazon Had Its Second Worst Year Ever: Could 2023 be Any Better?

Amazon (NYSE: AMZN) lost over 50% in 2022 and had its worst year since 2000 when it had dived 80%. After the sharp fall, many analysts see Amazon as a top idea for 2023.

2022 was a terrible year for stock markets, more so for tech stocks. Along with Amazon, Meta Platforms and Tesla also fell out of the trillion-dollar club. Apple’s market cap also fell very near $2 trillion. The company’s market cap hit $3 trillion on the first trading day of 2022 and it became the first company ever to achieve that milestone.

Amazon became the first company to lose $1 trillion in market cap. Meanwhile, several other tech names are having their worst year ever. The most prominent ones are Tesla and Meta Platforms which have lost 60% each. PayPal is also headed for its worst year ever and has lost around 62% in the year.

Coming back to Amazon, unlike other Big Tech companies, its underperformance began in 2021 only. The e-commerce giant barely managed to close in the green last year while the S&P 500 rose 27%.

Last year, Jeff Bezos quit as Amazon’s CEO and transitioned to the role of executive chairman. He handed the baton to Andy Jassy who was heading the company’s AWS business.

Amazon Is Headed for the Worst Year Since 2000

For investors, 2022 was somewhat similar to the dot com crash. Tech and growth names underperformed the markets in 2022 amid rising interest rates. The sell-off was particularly severe in newly listed tech names, almost all of which were invariably loss-making companies.

Many of the startup companies that went public between 2020 and 2021 were in the pre-revenue stage. Loss-making growth stories fell out of favor with investors in 2022 and many of them are now battling a survival battle.

As for Amazon, the company’s sales growth fell to the lowest level in two decades. AWS which has been its cash cow is also witnessing a growth slowdown and its topline growth fell to the lowest level in Q3 2022. The company started to separately report the cloud segment’s earnings in 2015 only.

To make things worse, AMZN finds itself overstaffed and has also overinvested in capacity. High inflation is also eating into its profits. Also, as brick-and-mortar companies ramp up their e-commerce operations, Amazon is facing competitive pressures.

AMZN is a Top Stock Idea for 2023

Citi, Bank of America, and JPMorgan are among the brokerages which have added AMZN stock to their 2023 top ideas list. Bank of America is optimistic that the company would gain market share in the e-commerce market and increase its margins. JPMorgan which previously listed Amazon stock as a top 2023 idea however recently lowered its target price to $130 from $145.

Goldman Sachs also listed Amazon as a top 2023 idea. We have a guide on how to buy Amazon stock.

In a client note, Goldman Sachs said, “AMZN (multiple years of stock underperformance as margins have absorbed COVID and macroeconomic headwinds; rising utility nature of the shopping habits of the Prime user base; cross platform narratives building across advertising & media consumption, potential for margin self-repair in 2023 and beyond; well established multi-year secular growth opportunity for AWS (despite near-term headwinds).”

Amazon Faces Headwinds in 2023

Amazon still has a strong moat and competitive advantages. However, it needs to navigate the tough macro environment. 2022 was a challenging year for US stocks as well as the economy. Wall Street analysts are divided on whether 2023 would be any better for the US economy amid rising recession fears.

Evercore ISI’s Mark Mahaney meanwhile finds Amazon stock a good buy at these prices even as he predicts a challenging 2023. While AMZN has taken several steps to cut costs, Mahaney believes that the company might need to do more to lower its costs. However, he finds Amazon a good buy for long-term investors.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.


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