Evercore ISI downgrades Procter & Gamble as it loses market share on Amazon

Evercore ISI downgraded Procter & Gamble (PG) to In-Line from Outperform, lowering its price target to $170 from $190, citing significant concerns over the company's e-commerce performance. The firm highlighted PG's relative market share losses on Amazon, which accounts for 50% of U.S. household and personal care growth, despite strong performance in traditional brick-and-mortar channels. This structural shift to online purchasing is expected to cap PG's sales growth below the 4% needed for operating leverage, posing a difficult short-term challenge for the company amidst broader macro pressures.

Analysis

Evercore ISI has downgraded Procter & Gamble (PG) to 'In Line' from 'Outperform' and cut its price target to $170 from $190, signaling a less bullish outlook. The primary driver for this revision is the company's significant market share loss on Amazon, which now accounts for 50% of all U.S. household and personal care (HPC) sales growth. While PG maintains a competitive advantage in traditional brick-and-mortar channels like Walmart and Costco, its weakness in the fastest-growing retail segment creates a structural headwind. The analyst, Robert Ottenstein, estimates this dynamic creates a two-point growth gap and could cap PG's overall sales growth below the 4% level required to generate operating leverage. This challenge is compounded by a similar shift to online retail in China, potentially delaying a turnaround. The downgrade suggests that while PG's stock has already declined 6% year-to-date, the market may not have fully priced in the adverse, long-term impacts of this channel shift.

Key Decisions for Investors

• Investors should reassess the long-term growth thesis for Procter & Gamble, as the structural shift to online channels where it is underperforming could persistently suppress sales growth below the key 4% threshold for operating leverage.
• Monitor PG's future disclosures for specific metrics on e-commerce performance and market share on Amazon, as a demonstrated improvement in this channel is now critical to justify a more bullish stance.
• Consider the 8% upside to the new $170 price target in the context of increased structural risk and a neutral 'In Line' rating, which suggests limited outperformance potential in the near-to-medium term.
• Given the analysis highlights Amazon as the key beneficiary of this consumer trend, investors may want to evaluate the relative strength of AMZN versus PG within their consumer sector allocation.