Goldman Sachs Reiterates Buy Rating on Amazon.com (AMZN)
Goldman Sachs analyst Eric Sheridan reiterated a Buy rating and $255.00 price target on Amazon.com (NASDAQ: AMZN).
The analyst comments "We believe that Amazon investors are (and will remain) focused on the potential financial impact of the reciprocal tariffs announced by President Trump on April 2 (weighted average tariff of 18.2%, inclusive of a 10% baseline tariffs & varying levels by individual country). In this note, we provide an illustrative analysis around the potential impact to Amazon’s 1P eCommerce business from those recent announcements. We see several potential scenarios that could carry a $5-10bn annualized EBIT impact from higher 1P merchandise costs (in Exhibit 7). That said, we also see a wide range of outcomes and encourage investors to evaluate this in the context of the full framework we present given the number of variables at play. We believe that Amazon has several levers at its disposal to mitigate the actual impact P&L impact of higher tariffs. These potential offsets include negotiating with vendors to avoid having to bear 100% of the higher input costs, increasing prices on certain items for customers, and mix shifts in the vendor base and products sold on the platform towards items that face lower tariffs (or US domestic alternatives). We also highlight that our estimate of Amazon’s worldwide merchandise margin remained largely stable in 2018-2019, during the first series of tariffs from President’s Trump inaugural term (Exhibit 5). While based on our estimates (not company disclosed financials) and on Amazon’s worldwide business (not just the US) we believe that this remains an important reference point for investors in thinking through how mitigating factors can help cushion the net impact of input cost increases. A few additional important notes: 1) Our analysis focuses on Amazon’s 1P Online Stores business and excludes any potential impact from Amazon’s 3P business, where Amazon does not bear merchandise cost exposure but could still see volatility to revenue if sellers increase their prices due to cost increases in their own P&L. 2) The closing of the de minimis exemption for China likely lowers competitive intensity, as the recent wave of China based exporters (Temu/TikTok Shop and others) that have been heavily reliant on the exemption now face sizable tariffs."
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Shares of Amazon.com closed at $178.41 yesterday.