By Adam Clark

Amazon.com's retail and advertising businesses are both set to suffer from U.S. tariffs on Chinese goods, according to Raymond James.

Analyst Josh Beck lowered his rating on Amazon stock to Outperform from Strong Buy. He cut his target for the stock price to $195 from $275 in a relatively rare downgrade for the e-commerce stock.

Amazon shares were down 1.7% at $169.70 in premarket trading on Monday.

"To be clear, we remain constructive on AI prospects/long-term investments, but with rising EBIT [earnings before interest and taxes] risk/limited monetization progress it is more challenging for us to stick with our Strong Buy rating," wrote Beck in a research note on Monday.

Chinese goods exported to the U.S. now face tariffs of 145%. The Trump administration also plans to pressure more than 70 nations to bar China from shipping goods through their countries to the American market.

About 30% of Amazon's first-party merchandise is sourced from China, led by electronics, toys, furniture, apparel and auto parts, according to Beck. The analyst estimates that Amazon faces a hit of about 10% to its gross margins in the first-party business, translating to a 2% drag on margins overall.

Additionally, China-based advertisers spent around $8 billion on Amazon advertising in 2024, according to Raymond James estimates. That comes to about 14% of total advertising spending, compared with 11% and 6%, respectively, for Meta Platforms and Alphabet's Google.

Amazon might have to spend several billion dollars to build alternative supply chains away from China, according to the Raymond James analyst.

"While we see the densification of non-China supply routes as more of an indirect cost, it could lead to suppliers embedding higher costs or supply chain investments on behalf of Amazon to help develop non-China routes," Beck wrote.

Write to Adam Clark at adam.clark@barrons.com

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April 21, 2025 09:03 ET (13:03 GMT)

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