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Morgan Stanley analysts reiterated an Overweight rating, a Top Pick designation on Amazon (NASDAQ:AMZN) shares.
The broker’s analysis points towards $2.2 billion in annual savings from the latest job cuts, implying a 6% increase to Morgan Stanley’s 2024 EBIT estimate of $37B.
“The incremental AWS headcount reductions should help protect AWS EBIT through the near-term macro and optimization driven deceleration. Indeed, our AWS 2Q:23 and full-year ’23 EBIT margins rise by ~100bps/~50bps (now at 21%/22% respectively) because of the lower AWS headcount. Looking ahead, our ’24 AWS EBIT margins rise by ~75bps (to ~24.5%),” the analysts wrote in a client note.
As a result, they raised the 2023/2024 EBIT estimates by 5% and 6%, respectively.
“Our ’23/’24 EBIT rises… as incremental headcount cuts speak to the levers AMZN has to pull to scale EBIT (in addition to continued fulfillment and shipping cost per unit improvements from leverage on the overbuild),” they added.
Morgan Stanley’s price target of $150 per share implies an upside potential of over 52% relative to Friday’s closing price.
Amazon shares are up 0.6% in pre-market Monday.
