Pacific Crest lowered its rating on Amazon to sector weight from overweight, citing increasing competition and "moderating" growth rates in its businesses.
The company's shares are up 4 percent in Friday premarket trading after it reported better-than-expected first-quarter earnings Thursday after the market close.
"Amazon's 1Q17 results were impressive. However, the stock is approaching our $961 target and stepped-up competition may dampen near-term upside," analyst Edward Yruma wrote in a note to clients Thursday titled "As good as it gets (for now)."
"1P [first party] growth rates point to moderating sales growth, and retail competition is intensifying. Nevertheless, we remain constructive long term and would look for a more-attractive entry point," he added.
First party represents the e-commerce business where Amazon sells products directly to customers. The internet company also has a third-party business, where other firms can sell goods on Amazon's website.
The analyst cited how Amazon's first-party sales grew 16 percent in the first quarter compared to 16 percent in the fourth quarter and 21 percent in 2016's first quarter. In addition, Amazon Web Services [cloud computing] growth slowed in the first quarter to 43 percent from 47 percent in the fourth quarter, while Microsoft's cloud business grew 93 percent in the March quarter.
Wall Street downgrades are a rarity for a beloved stock like Amazon. In fact, it hasn't received a downgrade from a major sell-side firm in over a year until Raymond James lowered its rating earlier this week, according to Street Account. Just seven of 40 analysts have hold ratings on the internet retailer, while 33 rate it buy or overweight, according to FactSet. No analysts have a sell rating.
The analyst retracted his previous $961 price target for Amazon, which represented 5 percent upside from Thursday's close. He did not provide a new target.
Amazon is one of the market's best performing stocks, with its shares up 22.5 percent this year through Thursday compared with the S&P 500's 7 percent return. The stock is also up 53 percent in the past 12 months.
"Moderating 1P and 3P trends could be a headwind for revenue and profitability growth. We believe that Walmart's aggressive stance in e-commerce makes it a much more formidable competitor," he wrote.
— CNBC's Michael Bloom contributed to this story.