Amazon’s China Dependence Is Starting to Hurt as Tariffs Force a Pricing Issue

Roughly 70% of goods sold on Amazon (NASDAQ:AMZN) come from China.

Amazon stock has been drifting lower this week as investors and analysts express concerns about its exposure to higher tariffs on Chinese imports.

Several Wall Street analysts have lowered their price targets for Amazon, including Cantor Fitzgerald and BMO Capital, on Wednesday.

Earlier this week, Wedbush, Morgan Stanley, Citigroup, DA Davidson, Deutsche Bank, and Citizens all lowered their price targets for Amazon, although most still consider it a buy.

As a result, Amazon’s stock price has fallen about 5% this week to around $176 per share. The stock is down some 19% year-to-date, and analysts see struggles ahead for the e-commerce giant.

The major concern stems from the fact that an estimated 70% of the goods sold on Amazon come from China, according to Wedbush, reported CNBC.

With Chinese imports now facing 145% tariffs, this has raised some red flags for investors. The huge tariffs will likely cause sellers to raise their prices, which could hurt sales. Either that or they have to absorb the tariffs to keep prices low. Either way, the choices aren’t ideal.

“Depending on which country you’re in, you don’t have 50% extra margin that you can play with,” Amazon CEO Andy Jassy told CNBC about sellers’ predicaments. “I think they’ll try and pass the cost on.”

Wedbush and Others Reduce Price Targets

Wedbush lowered its price target for Amazon to $225 per share, down from $280, due mainly to the tariffs. Further, the firm reduced Amazon’s Q1 net income estimates by 3% and dropped its estimate for revenue growth. The firm is now calling for revenue growth in the range of 2% to 6% for 2025.

Wedbush analyst Scott Devitt said the reductions stem from “limited visibility into current economic conditions” as well as the “potential implications of a weaker demand environment,” according to Investor’s Business Daily (IBD).

In addition, Wedbush analysts believe the uncertainty over tariffs could reduce AI spending by the Magnificent Seven companies by 10% to 15%.

Deutsche Bank took a more negative view, slashing its price target to $206, from $287. Deutsche analysts say the tariffs could reduce 2025 earnings by 15%.

“Focusing primarily on the U.S. e-commerce business, slowing U.S. retail sales (1% year-over-year) and e-commerce (5%) sales growth expectations, incremental tariff costs on goods out of China, Vietnam, and the rest of the world, and slowing Amazon advertising revenue growth, all conspire to potentially bring 2025 EPS estimates down by roughly 15% based upon a balanced case scenario with China tariffs reverting back to 54% and Vietnam tariffs ending up at 20%,” Deutsche Bank analyst Lee Horowitz wrote, according to IBD.

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Amazon still has a median price target of $260 per share, which suggests a 47% increase over the current price. Analysts, overall, remain bullish, but things remain very fluid and very uncertain.

Amazon is still trading at 32 times earnings, so it remains overvalued. This suggests that the price could potentially could go lower, depending on how Q1 turned out. Amazon reports Q1 earnings on April 29.

Original Post

Written By: ValueWalk