Wall Street’s profit expectations for Amazon “still appear elevated,” warns Morgan Stanley of Investing.com

Investing.com — Analysts at Morgan Stanley said in a note on Thursday that Wall Street’s profit expectations for Amazon (NASDAQ: ), particularly for the fourth quarter of 2024, may be too optimistic.

The bank pointed out that despite the bullish long-term outlook, short-term headwinds could hurt Amazon’s earnings before interest and taxes (EBIT).

Analysts see “tactical risk to Q4 EBIT” as the company continues to invest heavily in its lower-margin core businesses.

According to Morgan Stanley, Amazon’s push to expand its supply of essential goods, a key growth area, could hurt profits in the short term.

“We see AMZN’s high and increasing focus on lower-priced, lower-margin essentials driving pressure on commodity margins,” the bank says.

The pressure, combined with a competitive holiday season and cautious consumer spending, is seen as potentially weighing on Amazon’s North American profit growth.

The bank expects fourth-quarter EBIT to come in at about $1 billion to $1.5 billion, below Wall Street’s current estimate of $17.5 billion.

While this outlook may suggest a short-term pullback, Morgan Stanley remains bullish on Amazon’s long-term growth, especially as the company looks to 2025.

Analysts point to several profit drivers, including improved cost efficiency and a potential for corporate savings of $2 billion to $4 billion. They also note that Amazon’s Kuiper satellite project, which some fear could be a financial drain, is “probably manageable” at an annual cost of $600-700 million.

Morgan Stanley maintained its $210 price target on Amazon, expecting a return to profitability after 2024. “We view these earnings challenges as temporary and not structural,” the bank says, adding that it remains “buyers on weakness,” while looking toward multiple returns. drivers in 2025.