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Amazon The stock became the biggest laggard among the large technology stocks at the end of 2021, but there is reason to believe that 2022 may be a brighter year for the stock.
Amazon’s stock price rose by only 2.4% in 2021, far behind the other four so-called FAANG stocks. Apple Rose by 34%, Meta platform (Formerly Facebook) shares rose 23%, Netflix An increase of 11% and letter, Top technology stocks of the year, An increase of 65%.At the same time, technology giant Microsoft has risen 51% this year, and technology stocks Nasdaq Composite Index It’s up 21%.
The last time Amazon gave investors such a bad return was in 2014, when the stock fell 22%.
Analysts said there were several factors behind Amazon’s poor stock performance last year.
Like other e-commerce companies, Amazon faces a difficult year-on-year comparison compared to 2020, when the coronavirus pandemic caused a surge in online orders.
To avoid exposure to the virus, consumers have reduced their trips to physical stores and flocked to online retailers to buy everything from toilet paper and masks to office furniture and dumbbells. The shift to online shopping has boosted Amazon’s sales, EBay, IQIYI, Airshow And others, benefit their growth rate and increase their stock price.
Starting from the second quarter of 2020, Amazon’s profits have tripled year-on-year. This is the first period to reflect business growth driven by the pandemic, and it is the third consecutive quarter.
By the spring of 2021, as more and more Americans are vaccinated against Covid-19, consumers will begin to return to stores and shift part of their expenditures to pre-pandemic habits, such as traveling and eating out.
Although online shopping remains strong, Amazon’s impressive year-on-year growth rate has begun to weaken.inside Second quarter of 2021, Amazon’s revenue increased by 27%, a sharp slowdown compared with the same period last year, when sales soared 41%.
Amazon’s other key businesses, cloud computing and advertising, had a “very good year” in 2021, but this did not conceal the poor performance of Amazon’s core retail department. Forte said that he rated Amazon’s stock as a buy. The target price is $3,900 per share.
He added: “If you treat 2021 as a separate year, it shows that doing well in cloud and advertising is not enough.”
Forte said investors’ concerns about rising costs of Amazon’s core retail business may also cause the stock to perform poorly.
Amazon Warned Wall Street said that for most of 2020 and 2021, it will spend billions of dollars on coronavirus-related costs, such as taking safety measures for frontline workers and expanding its physical network to meet demand.
Then, just as Covid-related costs began to fall last year, Amazon and other large companies were hit by global supply chain constraints and labor challenges. CEO Andy Jassy said that Amazon will bear “billions of dollars” in additional costs in the fourth quarter of 2021 to solve these problems.
Amazon Raise wages and provide bonuses Attract workers in a tight labor market. Faced with inconsistent staffing levels in some warehouses, Amazon had to reroute packages to longer and sometimes more expensive distances so that it had facilities with enough staff to handle orders.
“We all know that there are costs associated with Covid-19, but when I realized that they face labor challenges, I was surprised,” Ford said. “This is a negative surprise, and I do think it has affected the performance of the stock.”
After experiencing the downturn in 2021, Amazon’s stock may be easier this year.
Guggenheim analyst Seth Sigman said that the company will face easier year-on-year comparisons after growth slows in 2021. Sigman said Amazon may also begin to benefit from the pandemic-related supply chain and logistics investments in the past two years.
“Our expectation is that after a slowdown in the past few quarters, growth should accelerate again in 2022,” Sigman said, his target price for Amazon stock is a buy rating, with a target price of $4,300.
Forte said that last year there were multiple sequelae that may still put pressure on Amazon’s stock in 2021, such as inflationary pressures, supply chain restrictions and labor challenges.
Despite this, several analysts including Jefferies, Bank of America Global Research, Royal Bank of Canada Capital Markets and Goldman Sachs still listed Amazon as the top choice for this year, citing expectations for a rebound in its e-commerce business.