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Author: Alan LittleDate: 2021-09-28

Amazon (AMZN) -1.5% as wage hikes increase “profit pressure”

Morgan Stanley said that Amazon’s (AMZN) recent wage hikes and hiring drive could hit its bottom line for the full year as its shares fell 1.5% on Monday.

Amazon (AMZN) traded down 1.5% early on Monday after Morgan Stanley cut its price target amid concerns that the online retailer’s recent hiring initiative and wage increases could hit its bottom line.

While higher rates of pay are great for employees and will calm talk about Amazon’s working conditions at warehouses, Morgan Stanley said that the move will increase “profit pressure”.

Amazon currently employs around 700,000 people in logistics-based roles in the US but is set to bring in more workers specifically in fulfilment and transportation to support demand for fast shipments.

Amazon revealed earlier this month that 150,000 people would be hired and be eligible for an $18 an hour starting wage, and additional bonuses and benefits depending on location.

Analyst Brian Nowak said that Morgan Stanley has subsequently lowered its EBITDA forecast for the full year to 2022 by 16% to 19%, though an overweight rating was reiterated.

Nowak added that the “cost of labor is rising” after noting that Amazon has now increased base wages for certain workers on three occasions in 2021.

The Seattle-based company has made gains on the stock market during that time, rising 12% since late March.

There was a modest decline on Monday though as AMZN dipped 1.50% to $3,374.10 by midday on the Nasdaq.

It was a better session for electronics retailer Best Buy (BBY) as its shares climbed 5.2% after Piper Sandler raised its price target from $146 to $150 on the potential strength of the new ‘Best Buy Total Tech’ membership programme.

Biotech company Acceleron Pharma (XLRN) jumped 6.7% on reports that it could be acquired in an $11bn deal.

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