Shares of Amazon.com Inc. slumped 1.1% in morning trading Monday, after Morgan Stanley cut its price target by over 4%, citing expectations that the e-commerce giant's expansion of one-day shipping will lower merchandise margins by raising costs. The stock is underperforming the broader market by a wide margin, as the Nasdaq Composite slips 0.1% and the Dow Jones Industrial Average eases 31 points, or 0.1%. Analyst Brian Nowak reiterated his overweight rating but lowered his stock price target to $2,200 from $2,300, but that is still about 24% above current levels. Nowak said that while one-day shipping is driving demand and revenue acceleration, he expects lower average order values pressuring company-wide merchandise margins. Nowak said for the second quarter, his research indicates one-day shipping costs per unit were 2.2-times higher than average shipping costs per unit, fulfillment costs were 2.0-times higher and average order values (AOVs) were 65% lower. He believes the lower AOVs are likely because one-day shipping has boosted orders of consumables.
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