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Amazon Target Cut at Morgan Stanley on Impact From Rising Wages

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(Bloomberg) --’s price target was cut at Morgan Stanley, which wrote that the online retailer’s profits could come under pressure as a result of a rising headcount and higher wages.

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The firm lowered its target to $4,100 from $4,300, putting it below the average analyst target of $4,157. The new view still points to upside of about 20%. Morgan Stanley, along with every other firm tracked by Bloomberg, recommends buying the stock, though it wrote that shares may be range-bound until revenue growth can re-accelerate in the first half of next year.

Shares of Amazon slumped as much as 2.5% on Monday, though they pared much of that decline and ended the session down 0.6%. Among other notable tech and internet names, Apple Inc. fell 1.1% while Microsoft Corp. closed down 1.7%. Alphabet Inc. fell 0.8% while Facebook Inc. rose 0.2% on the day. The Nasdaq 100 Index lost 0.8%. The day’s decline came as the 10-year Treasury yield rose, briefly topping 1.5%, the highest since June.

With the day’s drop, Amazon is down nearly 9% off a July peak, though it is nearly 7% above an August low.

Earlier this month, Amazon said it was looking to hire 125,000 warehouse and shipping workers, a move that follows an earlier pledge to hire more than 40,000 people in corporate and tech roles. It also said that starting wages for open logistics jobs would average $18 an hour, above the $15-per-hour base it set in 2018.

Amazon’s logistics workforce and rising wages “reveals more profit pressure ahead,” wrote analyst Brian Nowak, who cut his 2021 and 2022 EBIT estimates given the impact of these issues. However, he wrote that while the cost of labor is rising, the company’s growing logistics workforce “is set to enable more e-commerce share gains, faster ship speeds,” and new business opportunities.

(Updates to market close.)

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