Amazon.com Inc. (AMZN) is an e-commerce behemoth that sells consumer products and subscriptions worldwide. North America; International; and Amazon Web Services are the three operational segments of the company. Its shares are up 32% over the past month to close its last trading session at $142.57.

However, following several quarters of soaring growth during the pandemic, the company is now grappling with rising costs and lower discretionary spending, which in turn is impacting revenue and earnings. The company reported a net loss of $2 billion in the second quarter of 2022, marking the second quarter of net losses in a row.

The stock is down 15% over the past year and 14.5% year-to-date.

Deutsche Bank's Lee Horowitz believes AMZN has "held up relatively well." However, in the face of "accelerating growth headwinds across both e-commerce and cloud," Horowitz has reduced his 2023 operating income estimates by 14% and revised its new price target of $155, down from $174.

Here's what could shape AMZN's performance in the near term:

Mixed Financials

AMZN's net sales increased 7% year-over-year to $121.2 billion for the second quarter ended June 30, 2022. However, its operating income decreased 57.1% from the year-ago value to $3.3 billion. The company’s operating cash flow declined 40% for the twelve months ended to $35.6 billion.

Mixed Profitability

AMZN's trailing-12-month net income margin of 2.4% is 62.2% lower than the industry average of 6.3%. Also, its trailing-12-month ROA and ROE are 50.1% and 44.6%, lower than their respective industry averages. However, its gross profit margin of 42.7% is 16.2% higher than its industry average of 36.7%

Premium Valuation

In terms of forward non-GAAP P/E, the stock is currently trading at 1118.11x, 8644.7% higher than the industry average of 12.79x. Its forward Price/Sales of 2.78x is 186.9% higher than the industry average of 0.97x. Also, AMZN's forward Price/Book of 9.88x is 287.7% higher than the industry average of 2.55x.

Consensus Rating and Price Target Indicate Potential Upside

Of the 40 Wall Street analysts that rated AMZN, 39 rated it Buy, and one rated it Hold. The 12-month median price target of $176.04 indicates a 23.5% potential upside. The price targets range from a low of $118.00 to a high of $270.00.

POWR Ratings Reflect Stable Prospects

AMZN has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. AMZN has a D grade for Value and a C for Quality. Its higher-than-industry valuations are in sync with the Value grade. In addition, the company’s mixed profitability is consistent with the Quality grade.

Of the 66 stocks in the F-rated Internet industry, AMZN is ranked #28.

Beyond what I've stated above, you can view AMZN ratings for Growth, Stability, Sentiment, and Momentum here.

Bottom Line

Supply chain bottlenecks and inflationary pressures are expected to impact AMZN's e-commerce operations in the upcoming quarter. Furthermore, analysts expect its EPS to decline 29% and 70.5% in the current and next quarters. So, we think investors should wait for a better entry point in the stock.

How Does Amazon.com Inc. (AMZN) Stack Up Against its Peers?

AMZN has an overall POWR Rating of C, which equates to a Neutral rating. Check out these other stocks within the same industry with B (Buy) ratings: trivago N.V. (TRVG), Yelp Inc. (YELP), and Expedia Group Inc. (EXPE).

AMZN shares were trading at $142.16 per share on Friday morning, down $0.41 (-0.29%). Year-to-date, AMZN has declined -14.73%, versus a -12.38% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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