TLDR
- Amazon (AMZN) stock dropped by 2.66% to $193.6 amid market concerns over potential tariff effects
- The decline follows announcements from former President Trump regarding a 200% tariff on alcoholic beverages from the EU
- Despite the drop, Amazon maintains strong financials with a robust Altman Z-score of 5.54 and a Piotroski F-Score of 7
- The company is currently trading at a PE ratio of 35.01, close to its 10-year low, but is considered “Modestly Overvalued” according to GF Value
- Amazon is down 11.7% since the beginning of the year, trading 19.7% below its 52-week high of $242.06 from February 2025
Amazon shares experienced a notable decline on Thursday, with the stock dropping 2.66% to close at $193.91. This downward movement comes amid growing investor concerns over potential negative impacts from tariffs.
The immediate catalyst appears to be recent announcements from the Trump administration regarding potential new tariffs. President Trump stated on Truth Social that his administration was considering a 200% tariff on all alcoholic beverages imported from European Union countries.
This announcement was specifically in response to the EU’s existing 50% tariff on whisky. “This will be great for the Wine and Champagne businesses in the U.S.,” Trump added in his statement.
Treasury Secretary Scott Bessent also commented on the situation during a CNBC appearance. “We’re focused on the real economy…. I’m not concerned about a little bit of volatility over three weeks,” Bessent remarked.
The market reaction reflects broader anxiety about how such tariffs might affect major retailers and importers like Amazon. While Amazon doesn’t primarily deal in alcoholic beverages, the concern extends to potential broader tariff policies.
This latest drop continues a challenging period for Amazon stock. The company is now down 11.7% since the beginning of 2025.
At its current price, Amazon is trading 19.7% below its 52-week high of $242.06, which it reached in February 2025. This represents a substantial pullback over just a few weeks.
Amazon’s business indicators remain strong
Despite these short-term challenges, Amazon’s fundamental business indicators remain strong. The company holds a robust Altman Z-score of 5.54, which suggests good financial stability.
Amazon also boasts a high Piotroski F-Score of 7, another positive indicator of financial health. These metrics point to underlying strength despite market volatility.
The company’s profitability metrics tell a similar story. Amazon reports a return on equity (ROE) of 24.68% and a return on assets (ROA) of 10.49%.
From a valuation perspective, Amazon currently trades with a price-to-earnings (PE) ratio of 35.01. This is close to the company’s 10-year low, potentially suggesting value for long-term investors.
However, according to GF Value estimates, Amazon is still considered “Modestly Overvalued” with a GF Value estimate of $166.96. This creates somewhat mixed signals for investors considering entry points.
There has been some insider selling
It’s worth noting that there has been some insider selling activity at Amazon. Records show 120,641 shares sold over the past three months, which some analysts interpret as a cautionary signal.
Looking back at recent performance, Amazon reported impressive third-quarter earnings about four months ago. The stock gained 7.6% on that news as the company exceeded analysts’ expectations for EPS and operating income.
AWS (Amazon Web Services) reached a revenue run rate of $110 billion amid growing demand for cloud and AI services. The company’s advertising business also exceeded Wall Street’s expectations with strong margin expansion.
Amazon’s market capitalization currently stands at approximately $2.05 trillion, maintaining its position as one of the world’s most valuable companies despite the recent stock price decline.
Solid returns in last five years
For long-term investors who purchased $1,000 worth of Amazon shares five years ago, that investment would now be worth approximately $2,178, representing solid returns despite periodic volatility.
As markets digest the potential impacts of new tariff policies, Amazon investors will likely be watching closely for any updates from either the administration or the company regarding potential business impacts.
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