Amazon.com’s (AMZN) new “cost to serve” model highlights the potential for “significant upside” to base case estimates for the e-commerce giant, Morgan Stanley in a report emailed Monday.
The new model shows “material upside to retail profit and gives us increased confidence” in the company’s ability to deliver more than $100 billion in earnings before interest and taxes in 2026, Morgan Stanley said.
Morgan Stanley raised Amazon’s price target to $215 from $200 and kept the overweight rating. It also affirmed Amazon as a “top pick,” saying it’s “encouraged by the multiyear, efficiency based cash flow story.”
“Our new breakdown of retail cost to serve (which includes shipping, fulfillment, payment processing, inbound shipping, returns, and inventory shrinkage costs) highlights how early it is in [Amazon’s] retail profitability improvement efforts,” the report said.
Comments by Amazon’s management provided a “compass to follow and a path toward $10-$11 of ’26 FCF/share,” the investment firm said.