Amazon Stock Fell Despite Morgan Stanley’s Top Recommendation, With AWS Bottom in Sight

Amazon Stock


In a letter addressing the main proponents and detractors of Amazon’s (NASDAQ:AMZN) stock, Morgan Stanley restated its positive forecast for the company.

In 2023, Amazon stock will face challenges like decreasing AWS growth. As the year proceeds, this uncertainty should diminish, says Brian Nowak of Nowak Equity Research. The bank predicts that AWS’s revenue growth will slow to the mid-single-digit level in this year’s second and third quarters before picking up somewhat in the fourth quarter. He is even more assured that the cloud business’ backlog is expanding.

To paraphrase what he said, “we model AWS to increase 19% year over year” from now until 2024. We also monitor the sequential dollars added to AWS since they provide valuable insight into a business model predicated on a steady increase in clientele and revenue per customer.

Like how it has scaled down on moonshot investments and retail footprint development, Nowak believes the tech giant will be conservative in its cloud capital expenditures.

Nowak also expects a sharper emphasis on profitability in retail as fulfillment and shipping costs per item continue to decline. According to Nowak’s projections, the North American retail business would achieve a 4% EBIT margin by the end of 2023, thanks to increased efficiency.

As a result of the retail sector’s ongoing growth, “we envisage considerable positive revisions to EBIT from here,” Nowak said.

Nowak did admit to being apprehensive about the future of the global retail industry. He cautioned that attempts to break into lower-margin developing markets and widespread economic malaise outside the United States would likely impact earnings.

It will take time for AMZN’s developing countries to expand and scale out of losses. As Nowak put it, the UK, Germany, and Japan’s economies need to strengthen for International EBIT to rise.

Notwithstanding the cautious outlook on overseas retail sales, he offered the Amazon stock a $150 price objective and maintained an Overweight rating. He also reaffirmed that the stock is still the financial institution’s top recommendation.

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