Analyst Downgrades Amazon Target Amid Operational Shifts

Amazon shares have surged more than 5% in the first trading days of 2026, outpacing its peers in the "Magnificent 7" group. This strong start follows a comparatively weak 2025, where the stock gained only 5% and underperformed the S&P 500. Despite this early momentum, a prominent research firm has tempered its near-term outlook for the e-commerce giant.

Cantor Fitzgerald analyst Deepak Mathivanan has reduced the firm's price target on Amazon from $315 to $260. He cited growing macroeconomic uncertainties as the primary reason for the adjustment. The new target implies only modest upside from the current trading level of approximately $246 per share, which gives the company a market capitalization of around $2.63 trillion. Importantly, Mathivanan maintained his "Overweight" rating, signaling that the long-term investment thesis remains intact despite a more constrained short-term upside potential.

Institutional investors have also been making adjustments. Advanced Asset Management Advisors trimmed its position by nearly 10% in the third quarter, selling roughly 5,400 shares. Such moves are notable, even though institutional holders continue to control over 72% of the company's stock.

Operational Changes: Fees and Policy Updates

Beginning January 15, 2026, Amazon will implement new fees for its fulfillment services. On average, sellers will pay an additional $0.08 per unit, with fees for standard items priced above $50 increasing by $0.31. The company is also introducing a new category for bulky items, accompanied by adjusted storage costs.

These measures are seen as an effort to protect margins in the low-margin retail segment, especially as Amazon pours billions into artificial intelligence infrastructure. This focus on efficiency extends to personnel policy. Following a strict return-to-office mandate in 2025, managers now have the ability to track team attendance on an hourly basis. CEO Andy Jassy continues to drive this strategy aimed at reducing bureaucracy and enhancing operational efficiency.

Should investors sell immediately? Or is it worth buying Amazon?

Valuation and Key Growth Drivers

Amazon's valuation, with a price-to-earnings ratio of about 34, is considered moderate when compared to traditional retailers like Walmart or Costco. The core bullish argument continues to center on Amazon Web Services (AWS), which recently reported revenue growth of around 20%. Furthermore, operating margins in the North American retail business have shown signs of stabilization.

A significant question for investors is the timeline for converting massive AI investments—such as the reported computing capacity agreement with OpenAI—into meaningful free cash flow.

Upcoming Earnings in Focus

Market attention now turns to January 29, 2026, when Amazon is scheduled to release its fourth-quarter results. Analysts are forecasting earnings per share of $1.97 on revenue of $211 billion. The key points to watch will be whether the holiday shopping season met expectations and if AWS can maintain its growth momentum.

From a technical perspective, the stock is trading near its 52-week high of $258.60. A decisive break above this level could overshadow the cautious signal from the price target cut. However, if the broader market adopts a more wary stance, a period of consolidation ahead of the earnings report may follow. The overall analyst sentiment remains strongly positive, with approximately 96% of ratings still recommending "Buy."