Amazon.com’s (AMZN) core businesses are “inflecting” as the company sees benefits from logistics efficiencies, regionalization, inventory management, and acceleration of its Amazon Web Services, Morgan Stanley said in a Friday note.
“[Amazon’s] results and guide speak to how improving execution, cost discipline, and an AWS recovery are leading to outsized EBIT and free cash flow revisions,” the investment firm said. Amazon reported Q4 diluted earnings late Thursday of $1 per share, up from $0.03 a year earlier, as net sales increased to $169.96 billion from $149.20 billion.
Morgan Stanley said Amazon’s global cost to serve declined in 2023 for the first time since 2018 and the company could see further reductions from a bigger fleet, inventory optimization, and inbound shipping improvements. The firm also expressed optimism over AWS’ accelerating revenue and growing generative artificial intelligence offerings to continue through 2024.
Morgan Stanley said Amazon is poised for an “efficiency-based cash flow story” in 2024, while improvements in grocery, AWS, and capital returns to serve as key drivers for this year and next.
Morgan Stanley reiterated its overweight rating on Amazon and raised its price target to $200 from $185.