Amazon (AMZN) Stock: China Tariff Hit Could Be Worse Than Investors Think

TLDR

Raymond James downgraded Amazon from Strong Buy to Outperform, cutting price target from $275 to $195 Trump’s 145% tariffs on Chinese imports pose risk as 30% of Amazon’s gross merchandise value is “China-linked” Amazon stock has fallen 24% year-to-date and 31% from February peak Company plans heavy spending on AI cloud data centers and logistics Wall Street may underestimate earnings pressure for 2025-2026 despite 93% of analysts rating stock a buy

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Amazon shares dropped 3% on Monday after Raymond James analyst Josh Beck downgraded the e-commerce giant from Strong Buy to Outperform. The move reflects growing concerns about tariff impacts and the company’s heavy investment cycle.

Beck cut his price target significantly from $275 to $195, making it the lowest among analysts tracked by FactSet. The downgrade centers on potential earnings pressure in 2025-2026 that Wall Street may be underestimating.

Amazon.com, Inc. (AMZN)

President Trump’s recent 145% tariffs on Chinese imports create a particular challenge for Amazon. About 30% of the company’s gross merchandise value comes from China, spanning electronics, toys, furniture, apparel, and auto parts.

Chinese sellers also account for approximately 15% of advertising purchases on Amazon’s platform. This gives Amazon more exposure to China than competitors like Meta and Google, which derive 11% and 6% of ad revenue from Chinese advertisers, respectively.

Investment Cycle Concerns

The tariff headwinds come as Amazon embarks on major capital investments. CEO Andy Jassy announced in February that the company plans to spend over $100 billion in fiscal year 2025, with most going toward AI infrastructure for Amazon Web Services (AWS).

These investments extend beyond AI to include expanding logistics capabilities and funding “moonshot” projects like Project Kuiper satellite internet and Zoox autonomous vehicles.

Beck wrote that while these investments have positive long-term potential, the lack of visibility into investment levels and return on investment in 2025-2026 warranted the downgrade.

The analyst projects AWS generative AI revenue will grow 80% to reach $5 billion in 2025. However, this remains just a fraction of Amazon’s triple-digit capital investments in the technology.

Stock Performance Struggles

Amazon’s stock has been in a slump since its fourth-quarter results in early February. While the company beat earnings estimates, it provided a lower-than-expected sales forecast for Q1.

Shares have tumbled 31% from their record high of $242.52 reached on February 4 and are down 24% year-to-date. The stock also fell below its 200-day moving average late last month and remains well below this long-term trendline.

Amazon closed Monday at $167.32, down 3% for the day. The downgrade contributed to broader tech sector losses, with Apple, Microsoft, and Google falling around 2%, Meta dropping more than 3%, and Nvidia sinking 4.5%.

Beck lowered his estimates for Amazon’s earnings before interest and taxes (EBIT) to $73 billion from $79 billion for fiscal 2025. For 2026, he cut his EBIT forecast to $86 billion from $97 billion.

These estimates are more bearish than Wall Street consensus, which projects Amazon’s EBIT to reach $80 billion in 2025 and $98 billion in 2026.

Despite the downgrade, Beck emphasized that Raymond James remains “constructive on AI prospects/long-term investments” but finds it “more challenging to stick with our Strong Buy rating” given the rising EBIT risk and limited monetization progress.

The recent market pressure follows Trump’s announcement of steep “reciprocal” tariffs on key US trading partners this month and a 10% tariff on all global imports implemented on April 5. The Magnificent Seven tech firms, including Amazon, shed $2 trillion from their combined market capitalizations after the initial announcement.

While most reciprocal tariffs were paused for 90 days, the 145% duty on Chinese imports remains in effect, continuing to pressure companies with significant exposure to China.

Wall Street still largely maintains a positive outlook on Amazon. Approximately 93% of the 75 analysts following the stock rate it a buy, according to FactSet.

However, the average one-year price target has declined to $252.03, down 6% from February, suggesting growing caution among analysts.

Investors will soon get more clarity on Amazon’s performance and outlook when the company reports its first quarter earnings on May 1, which could provide insight into how these tariff and investment concerns are affecting the bottom line.

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