BofA Securities analyst Justin Post maintained Amazon.com Inc AMZN stock with a Buy rating and lowered the price target from $257 to $225 Wednesday.
President Donald Trump’s April 2 tariff announcements were much more significant than expected, including the China tariffs that could go higher this week. While Amazon sales seemingly felt little impact from 2018 China tariffs, the widespread (and much larger) 2025 global tariffs are a potential threat for supply chains and costs.
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Post noted Amazon’s robust 3P (third-party) supplier network and large scale with 1P (first-party) suppliers can help with inventory and product costs. However, as tariffs stand today, the analyst expects material cost inflation in Amazon’s marketplace. He notes the tariff and supply chain situations remain fluid.
The negative impact of tariffs on 1P sales could be lower unit sales and margins, and for 3P, lower units and ad spend, though higher ASPs could offset this.
Post modestly lowered his GMV estimates, with lower units mostly offset by higher prices. The analyst also lowered gross margins, expecting some margin pressure on 1P unit sales, lower 3P ad spend, and slightly lower AWS revenue growth due to lower business confidence.
Overall, he lowered 2025E gross profit by $10 billion, GAAP operating profit by $5 billion, revenue to $683 billion from $696 billion, and EPS to $5.76 from $6.16. If tariffs on Asian countries stick or in a recession scenario, the analyst would expect a bigger impact.
Post would expect retail share gains for Amazon, given its low-priced 1P strategy and robust 3P seller selection as consumers shop for lower prices.
Amazon should also benefit from its rapidly growing essentials business and leverage in Cost to Serve.
Also, if current foreign exchange market rates hold, the second quarter could have a 50bps tailwind to total revenue, which would be improved versus a 70bps headwind in the first quarter.
Amazon’s AWS business should see limited tariff impact, though a broader economic slowdown could risk IT spending.
AMZN Price Action: Amazon stock is up 1.15% at $172.62 at publication Wednesday.
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