- Raymond James believes Amazon needs to show better profitability to justify further gains.
- Firm downgrades shares to market perform form outperform.
- Amazon's stock is up 21 percent this year and 45 percent in the past 12 months.
Raymond James just went where few Wall Street firms dare to go.
It lowered its rating on Amazon to market perform from outperform, saying the company needs to show better profitability to justify further gains.
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, according to Street Account. Just six of 40 analysts
"We believe shares are fairly valued and near our previous price target. … At current levels, we believe Amazon will need to begin to show greater operating [profit margin] leverage for shares to move meaningfully higher and reach our bull case," analyst Aaron Kessler wrote in a note to clients Tuesday. "Specifically, we would like to see improved margins/
The analyst retracted his previous $925 price target for Amazon, which represented 2 percent upside from Monday's close. He did not provide a new target.
Amazon is one of the market's
"Amazon continues to invest aggressively across a number of key areas, including fulfillment centers, digital content costs (e.g., recent NFL deal), Prime services, Alexa/Echo, and India," Kessler wrote. "While we expect 2H operating margin improvement, this is largely anticipated by consensus estimates and we believe shares reflect the improved back half outlook."
On the flip side to Raymond James' move, Goldman Sachs reiterated its buy rating
Smaller shop Monness, Crespi, Hardt & Co. downgraded Amazon to neutral from buy in January 2016, according to StreetAccount. All of the major banks
The internet giant will report first-quarter earnings on Thursday.
— CNBC's Michael Bloom contributed to this story.