Amazon Stock Faces Steep Decline Amidst Growing Headwinds

Amazon stock plummets today as a series of developments weigh heavily on the tech giant’s financial prospects.

Firstly, an analyst at Wells Fargo predicts that Amazon.com, Inc. (NASDAQ: AMZN) will have a challenging fourth quarter, projecting a $2 billion decline in operating income. The forecast is based on three main factors – hiring 250,000 seasonal laborers, competition from the new TikTok Shop, and the rising cost of diesel fuel driving up freight costs.

The analyst also foresees the heightened competition in the e-commerce sector, which could further dampen Amazon’s performance in the fourth quarter. Nevertheless, the analyst maintains an “outperform” rating on Amazon stock, with a price target of $165.

In another twist, Bloomberg’s report last night revealed Amazon’s decision to abandon its plans to impose fees on merchants who opt not to use its shipping services. This move is a possible response to an ongoing Federal Trade Commission (FTC) antitrust investigation.

Furthermore, the market’s response to Amazon’s recent rollout of new devices and artificial intelligence (AI) features appears lukewarm. This tepid reaction, combined with concerns over a possible Federal Reserve rate hike later this year, adds to the uncertainty surrounding the company’s growth prospects.

Amazon stock has been on a steady ascent this year, recovering from a sharp downturn in 2022 when its e-commerce growth stalled as the global economy reopened post-pandemic.

However, Amazon continues to grapple with challenges in its Amazon Web Services division, the cloud infrastructure unit and faces sluggish growth in its e-commerce segment. Experts doubt whether the e-commerce giant can recapture pre-pandemic growth rates of 20% or higher, especially with annual revenue nearing the $600 billion mark.