Anayst Explains Amazon (AMZN) Tariff Exposure

Amazon shares are on investors’ radar as the company launches new initiatives to grow its consumer business. Recently,  CNBC reported that the company’s devices unit got a new team to develop “breakthrough” consumer products. The stock is up 10% over the past 30 days.

Scott Devitt, Wedbush Securities senior analyst, recently explained in a program on CNBC why Amazon (AMZN) is less sensitive to the impact of tariffs than Walmart.

Amazon’s model is a little different than Walmart in that two-thirds of the sales come from third parties who set their own prices. So Amazon uses its first-party business to help drive competitive pricing, but a lot of the decisions are made outside of Amazon. And so the marketplace in general is a price-following marketplace. So if others hold price firm, I think you’ll see merchants on Amazon be forced to hold price firm. If Walmart tweaks pricing in some areas, you’ll see Amazon prices rise as well.

Amazon yet again impressed with its Cloud business in its latest quarterly results. AWS revenue jumped 16.9% year over year in the most recent quarter, while its operating income rose 22.6%. AWS has now surpassed a $100 billion annual run rate, playing a central role in helping businesses modernize infrastructure, reduce costs, and accelerate innovation.

The market often overlooks Amazon’s ads business, which is generating more than $10 billion in quarterly revenue despite being built from scratch. In the first quarter, ad revenue rose 19% from a year earlier to $13.9 billion, continuing to support overall profitability.

According to some Wall Street estimates, Amazon is projected to earn $6.20 per share in 2025 and $8.95 in 2027, reflecting 44.4% earnings growth over two years. The stock currently trades at 20.7 times its expected 2027 earnings, which makes it attractively valued.

Polen Global Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2025 investor letter:

“Amazon.com, Inc. (NASDAQ:AMZN) fell -13% in the quarter, stemming from weaker-than expected first quarter guidance and concerns over the potential tariff-induced headwinds they may face, given that many third party sellers on their e-commerce platform are based in China. However, we think their first-party and third-party commerce platform should prove fairly resilient, aided by strength in their Amazon Web Service cloud business and its bottom-of-funnel advertising business. Amazon remains our largest position, as we expect roughly 20% earnings growth over the next five years, driven by solid organic revenue growth and continued margin expansion. It remains an incredibly well-managed business with sustainable advantages and a long growth runway.”

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Disclosure: None. This article is originally published at Insider Monkey.