Amazon.com Inc (NASDAQ:AMZN)’s growing investment in robotics represents a significant long-term cost-saving and margin-enhancing opportunity, analysts at Bank of America believe.
The analysts have a ‘Buy’ rating on Amazon and a $248 price target, implying upside from Friday’s share price of about $212.
They highlighted Amazon’s expanding ambitions in delivery automation, including the potential use of humanoid robots.
“Amazon is designing an indoor obstacle course for humanoid robots, one of many steps to train humanoids for package delivery,” they wrote, referring to a report from The Information.
The initiative remains in its early stages, but could eventually evolve to humanoid robots “riding in the back of Rivian vans before leaping out to deliver packages.”
While Amazon has not publicly confirmed the initiative, the analysts see the development as aligned with the company's broader robotics strategy. Amazon is reportedly taking on the AI software development while testing multiple third-party hardware solutions, including one robot from Unitree priced around $16,000 per unit.
“If successful, there could be a ‘large financial incentive [for Amazon] to automate,” the analysts believe.
However, they cautioned that the rollout is still likely years away. “As with autonomous vehicles (AVs), we would expect several years of testing before trials could begin,” they wrote. “We think that it would be much easier to automate internal processes than external.”
Notably, Amazon introduced seven new robots designed to optimize its delivery stations in May. The analysts project that robotics in delivery could drive more than $7.1 billion in annual savings in 2032, which excludes potential savings from humanoid robots.
Amazon’s robotics strategy also enhances its position as a broader AI player, Bank of America added.
“Artificial intelligence should be an important driver of robotics, and emerging robot applications can expand Amazon's AI opportunity beyond AWS to retail,” analysts wrote.
They project that with continued automation and operational efficiency, Amazon could eventually raise its retail margin to 11%, assuming breakeven performance in first-party (1P) retail, stronger 20% margins in third-party (3P) sales, slight profitability in Prime, and a robust 55% margin in advertising.
“With leading robotics infrastructure, we think that Amazon could have a better opportunity to move 1P to profitability as a low-cost provider and move 3P shipping margins even higher,” they concluded.