Near-Term Pressure Not Unique to Amazon; Well-Positioned for Long-Term Growth; FVE Cut to $150

Amazon reported disappointing third-quarter results and provided investors with soft fourth-quarter guidance, with the performance of AWS being our greatest near-term concern. This quarter stings, as this was supposed to be the quarter where Amazon had finally lapped pandemic-fueled issues. We continue to believe long-term growth driven by e-commerce proliferation, AWS, and advertising, but the near term is clouded by a variety of macroeconomic issues, including currency headwinds, high inflation, soaring energy costs, and deceleration in AWS. We can look through these issues but we believe they are likely to persist throughout 2023, which decreases our confidence over the medium term as well. We are lowering our growth and profitability assumptions, and in turn our fair value estimate drops to $150 per share, from $192 previously. Still, we are not ready to throw in the towel on Amazon and we see shares as attractive, but clearly the company has still not found stable footing on its path out of the pandemic.