Amazon downgraded Wells Fargo to a “positive review story on pause” by Investing.com

Investing.com — Wells Fargo downgraded Amazon (NASDAQ: ) to Equal Weight from Overweight in a note to clients on Monday, citing several headwinds that could stall the company’s positive earnings revision story.

The bank cut its price target for the stock to $183 from $225, highlighting challenges that may limit Amazon’s operating income (OI) growth through 2027.

According to Wells Fargo, while Amazon Web Services (AWS) remains strong, it is “not enough” to prompt positive revisions to near-term estimates.

Several factors, including investments in Project Kuiper, pressure from Fulfillment by Amazon (FBA) fees and moderation in advertising contributions, are expected to influence Amazon’s revenue growth.

The firm warns that “margin expansion could also be limited in 1H25” and that the company is unlikely to see a resumption of positive revisions until July 2025 guidance.

“While the market is more prepared for pressure on 4Q OI, we caution that margin expansion could be limited in 1H25 as well. As such, we are moving to Equal Weight until visibility on margin expansion resumes,” Wells Fargo writes.

Wells Fargo cut its OI estimates for Amazon by $5.4 billion, $4.5 billion and $5.5 billion for 2025, 2026 and 2027, respectively, attributing the cuts to slower monetization of merchant services and advertising .

“Amazon remains a margin expansion story,” Wells Fargo noted, adding that the pace of that expansion will likely be more moderate than the market currently expects.

The report also points to growing competition from Walmart’s (NYSE: ) expanding fulfillment services, which are now priced 15% cheaper than Amazon’s FBA offering.

Wells Fargo believes Walmart’s growing capabilities could put pressure on Amazon’s fees and merchant services.

Given the challenges, Wells Fargo sees limited visibility into Amazon’s near-term earnings recovery and has therefore lowered its price target and rating on the stock.