Amazon Reiterated as Top Pick at Morgan Stanley, Credit Suisse By Investing.com

By Senad Karaahmetovic

Amazon (NASDAQ:) is due to report on its Q3 performance next week. Heading into the print, Credit Suisse analysts cut the price target to $159 from $170 per share. The lowered price target reflects decreased 2022/23 EPS estimates.

“We expect 3Q22 results to provide another data point for Amazon’s entry into a harvest period following aggressive investments since the onset of the Pandemic – i.e. sustainable operating profit growth given the confluence of: 1) higher service levels with greater availability of 1-Day/Same-Day Prime delivery driving share gains, and 2) moderating OpEx growth (particularly shipping and fulfillment) as Amazon is only now starting to grow into its expanded infrastructure (we estimate that 2024 will mark the normalization of its capacity utilization),” Ju said in a client note.

Still, the analysts reiterated AMZN stock as the firm’s Top Pick. They highlighted the 3 key factors behind their bullish stance.

1. E-commerce segment operating margin expansion;
2. Optionality for faster-than-expected FCF growth vis-à-vis its advertising segment; and
3. Upward bias to AWS revenue forecasts and likely more moderate deceleration path.

Similarly, Amazon shares are reiterated as Top Pick at Morgan Stanley with analysts seeing about a 50% upside from current levels. The analysts reaffirmed their bullish view on AMZN, following a deep-down EBIT analysis.

“While we don’t expect a ~$7bn 4Q EBIT guide (expect ~$5bn guide) our analysis of AMZN’s fulfillment and shipping cost/unit growth in 2Q vs long-term averages (2Q showed scale driving efficiency across AMZN’s overbuild) highlights the key profit driver,” the analysts wrote to clients.