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Amazon Stock: Tough Setup for 2023 But Positive Outlook for Subsequent Quarters

Bank of America (BofA) has lowered its price target for Amazon stock to $135 per share, citing a tough setup for the stock in the first half of 2023.

Amazon building
Amazon building

However, the bank remains positive about the stock's performance in subsequent quarters.

BofA expects consumer and corporate spending cuts to exert pressure on Amazon in Q1 but believes that a more favorable consumer spending environment and the prospect of lower interest rates could lead to multiple expansions in 2023. On a client note, BofA economists expect inflation to fall below 3% by the end of 2023.

Despite several headwinds from 2022 that pushed Amazon shares lower, BofA believes that these could reverse in 2023, and coupled with elevated Capex cuts, this fuels the reiteration of a Buy rating on Amazon stock. The bank cites share gains in retail, the potential to resize capacity and improve retail margins, a strong market position in cloud services, and strong profit centers in a model (3P, advertising, AWS) as reasons for their positive outlook.

BofA estimates Amazon will generate revenue of $560 billion and a GAAP profit of $20 billion in 2023, which compares to consensus for revenue of $562 billion and a GAAP profit of $19.8 billion. However, BofA is below Street on AWS revenue and margins.