Amazon Faces Rare Downgrade—Is the Rally at Risk?

Key Points

• Amazon stock is up 40% since April, fueled by strong earnings and bullish sentiment.
• However, Zacks Research recently downgraded the stock to Hold, which is a rare move. 
• Risks exist, but most analysts remain firmly bullish with targets well above current levels.

For months now, Amazon.com Inc. NASDAQ: AMZN has been one of the strongest performers among the mega-cap tech names. Shares are up roughly 40% since April, a rally driven by consistently strong earnings reports and near-unanimous support from Wall Street analysts. With equities broadly in risk-on mode and major indices hitting all-time highs, Amazon has thrived in the kind of environment where it historically performs best.

That backdrop makes the downgrade from Zacks Research towards the end of August all the more striking. Having previously rated Amazon a Strong Buy, Zacks cut its stance to Hold.

For context, this was the first downward move since February, when Phillip Securities shifted from Strong Buy to Moderate Buy. But even they stayed bullish at the time and stopped short of rating it a Hold. 

According to MarketBeat’s Analyst Forecasts tool, investors would need to go all the way back to August of last year to find a comparable downgrade. The rarity of such a call is what makes it stand out so much, and investors should be asking themselves if this is just an anomaly or potentially the start of a major shift in analyst outlook.

Let’s jump in and take a closer look.  

Why the Nerves?

Whenever there’s an update like this that goes against the grain, it naturally makes some investors nervous. Downgrades like this often raise questions about whether a stock’s rally is sustainable, or if there are new and unknown risks suddenly appearing. 

To be sure, Amazon has plenty of headwinds, just like any other stock—its soaring expenditure on AI investments, for example, has worried investors who are unsure when those bets will pay off. The company is also more exposed than many of its peers to logistics challenges and geopolitical uncertainty, particularly the U.S. tariffs that have jolted markets several times this year.

These risks are real, and they have already weighed heavily on the stock at times. Amazon fell more than 30% between January and April, as investors digested these concerns. 

But that selloff now looks like it priced in much of the downside. The stock’s recovery since April suggests Wall Street has already chewed through the worst of those worries, which makes Zack’s update all the more perplexing. 

What the Chart Says About Amazon Stock

From a technical perspective, the stock is clearly in a bullish uptrend, but the next few weeks will still be critical. Amazon shares need to push through resistance around the $235 level if they’re going to have a fair chance of cracking February’s all-time high. 

If Amazon clears it with conviction, its shares would be cruising into blue-sky territory. Failure to break out, however, could invite another test of August’s low around $210, and it’s perhaps this risk that has influenced Zacks’ decision to go neutral. 

For now, momentum still favors the bulls. Amazon has been setting higher lows for weeks, and every dip has been bought quickly. If that pattern continues, the weight of the broader market rally and investor appetite for growth stocks should carry the stock higher.

Amazon’s Recent Gains Shrug Off Bearish Calls

It’s also worth remembering that Zacks remains the exception, not the rule, and the analyst community is overwhelmingly bullish. Many of the largest firms have reiterated Buy or Outperform ratings in recent weeks, often with price targets in the $280–$300 range. 

For example, Goldman Sachs, Morgan Stanley, and Evercore continue to see Amazon as a top-tier pick. Multiple growth drivers in place should lead to further upside in the stock.

It remains to be seen how much weight Zacks’ downgrade carries, but given the stock's already seen further gains since the bearish update, it’s looking more and more like it’s been shrugged off. Until a few more bulls switch over to the bear camp, it’s fair to expect the stock to keep going higher in the near term, not lower.