Once a seemingly unstoppable business, Amazon (NASDAQ:AMZN) is now facing difficulties that could weigh on AMZN stock for a while. This doesn’t mean Amazon won’t survive. The e-commerce giant’s shareholders will probably prevail in the end, but the next few months could be challenging.
The Amazon share price has dropped from $185 to around $100, and there are undoubtedly a lot of disappointed investors. They’ll want to know whether the stock will go back up, and the answer depends on how long they’re willing to wait.
A market leader like Amazon, with its deep capital reserve and brand-name recognition, should be able to manage its problems. Still, investors should be aware of those problems and can adjust their strategies and allocations accordingly.
Macro-Level and Company-Specific Issues Weigh on AMZN Stock
The drawdown in AMZN stock may, in part, be attributable to macroeconomic factors that Amazon didn’t cause. These include elevated inflation, supply chain disruptions and fears of an imminent recession.
As long as those issues persist, Amazon and its investors could continue to struggle. Plus, there are company-specific problems to consider. First and foremost, Amazon swung from $33.4 billion in net income for 2021, to a disheartening $2.7 billion net loss in 2022. MarketWatch described this result as Amazon’s “worst annual loss ever.”
Meanwhile, Amazon’s grocery division, Amazon Fresh, isn’t doing as well as some folks might have hoped it would. According to Reuters, Amazon “has closed some grocery shops and impaired certain assets.” Moreover, Amazon incurred a $720 million charge related to this in 2022’s fourth quarter.
Making matters worse, per the Wall Street Journal, the U.S. Federal Trade Commission (FTC) is reportedly preparing a possible antitrust lawsuit against Amazon. Will Amazon have to break up and/or spin off parts of its business? Investors might be anxious about this for a while, and AMZN stock could remain under pressure during the coming months.
Amazon’s Shareholders Should Be Patient
Not everyone is worried about Amazon’s future, however. MoffettNathanson analyst Michael Morton assured Amazon’s stakeholders, “Uncertainty remains, but we believe patience will be rewarded.”
When mentioning “uncertainty,” Morton may be referring to Amazon’s cloud-computing unit, Amazon Web Services (AWS). Investors should note that AWS generated fourth-quarter 2022 revenue of $21.38 billion and operating income of $5.21 billion. Unfortunately, those results fell short of the analyst consensus estimates of $21.85 billion in revenue and $5.73 billion in operating income.
Still, Morton envisions long-term success for Amazon’s cloud-computing business. “As Amazon negotiates larger and longer-term deals with customers for price discounts, it will pressure [AWS] margins in the near term, but reward the company in the long-term,” the analyst explained.
So, Will AMZN Stock Go Back Up?
I tend to concur with Morton’s prediction that patience with Amazon will be rewarded. Morton assigned an “outperform” rating and a $117 price target on Amazon shares, which isn’t unrealistic at all.
A year from now, AMZN stock will probably be moderately higher than it is today. Eventually, the stock should revisit its prior peak of around $185. Given Amazon’s current problems, however, don’t be surprised if the share price wiggles and wobbles. If you can handle that, then feel free to buy a few shares and hold on for what could be a rocky ride.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.