Wedbush analysts believe Amazon took “its foot off the gas pedal” on some of its spending in order to deliver higher profitability during the second quarter of 2023, calling it a “prudent decision” and a “page out of the Bezos Playbook.”
In a note to clients, they raised their 12-month target price on the stock to $170 per share from $146, while maintaining an ‘Outperform’ rating, following the eCommerce giant’s better-than-expected 2Q revenue and earnings on a record gross margin.
"We agree that Amazon customers want these things (like next-day delivery, same-day delivery and retail grocery stores), but are not convinced that the incremental benefit of providing them is worth the cost, particularly if the pursuit of the initiatives results in a lower share price," the analysts wrote.
"Ultimately, shareholders are willing to pay for sustainable profits."
They added that the 2Q outperformance was the result of cost-cutting initiatives within the company’s fulfillment and transportation network, with management detailing there is still more room for margin improvements within the segment.
Shares of Amazon.com climbed 9% to $140.65 in mid-afternoon trading on Friday and have gained 64% in the year to date.
Contact Sean at sean@proactiveinvestors.com