Amazon Faces Tariff Turbulence But Analyst Sees Favorable Trends

Core Viewpoint - BofA Securities analyst Justin Post maintains a Buy rating on Amazon.com Inc (AMZN) but lowers the price target from $257 to $225 due to potential impacts from tariffs and supply chain issues [1] Group 1: Tariff Impact - President Trump's recent tariff announcements are more significant than expected, with potential increases in China tariffs, posing a threat to Amazon's supply chains and costs [1] - The analyst expects material cost inflation in Amazon's marketplace due to current tariffs, despite the company's robust supplier network [2] - Negative impacts from tariffs could lead to lower unit sales and margins for 1P sales, while 3P sales may experience lower units and ad spend, although higher average selling prices (ASPs) could offset some of this [3] Group 2: Financial Estimates - The analyst has lowered 2025E gross profit by $10 billion, GAAP operating profit by $5 billion, revenue from $696 billion to $683 billion, and EPS from $6.16 to $5.76 [4] - If tariffs on Asian countries persist or a recession occurs, a more significant impact on Amazon's financials is expected [4] Group 3: Market Position and Growth - Amazon is anticipated to gain retail market share due to its low-priced 1P strategy and strong 3P seller selection as consumers seek lower prices [4] - The company is expected to benefit from its rapidly growing essentials business and leverage in Cost to Serve [5] - The second quarter could see a 50 basis points tailwind to total revenue if current foreign exchange rates hold, improving from a 70 basis points headwind in the first quarter [5] Group 4: AWS Business - Amazon's AWS business is expected to experience limited tariff impact; however, a broader economic slowdown could risk IT spending [5]