‘We still just like the stock,’ analyst says following layoffs

There’s still lots to love about Amazon (AMZN) stock, although the corporate’s coming off a tough yr, JMP Securities Equity Research Analyst Nick Jones recently told Yahoo Finance Live (video above).

Amazon had a rough 2022, one wherein the corporate’s stock tumbled greater than 40% all year long. The corporate’s been battling high inflation, rising rates, and a slow promoting market, and recently announced it will up the variety of layoffs it was doing in its corporate workforce from 10,000 to 18,000.

Nevertheless, Amazon’s still headed in the precise direction in response to Jones. “We like Amazon investing in future technology, we like them investing in growth,” he said. “For us, we do not think it has to occur. We just like the stock from here, today.”

The layoffs, Jones said should not bad news for the corporate’s outlook.

“It’s a really small chunk of their workforce,” he said, as Amazon’s total corporate workforce is about 300,000 strong. “We view it as, ‘They’re starting to have a look at operating income.’ That is an area that investors are increasingly taking a look at. They need to see Amazon give higher guidance to those numbers as we progress through each quarter. So, while we do not think it’s really going to maneuver the needle materially, we like that they are specializing in this they usually’re making cuts.”

Heading into Q4 earnings, Amazon’s guidance has been weak, as the corporate in October said it was expecting to report between $140 billion and $148 billion in revenue to shut out the yr, missing analysts’ expectations.

For all of the turmoil the corporate’s experiencing, Jones believes CEO Andy Jassy is playing his cards right, saying that Jassy has gotten caught within the crossfire of a macroeconomic downturn.

“You’ll be able to’t fight the Fed,” he said. “You’ll be able to’t fight macro, and I believe this could be very much a macro, Fed-driven market, and that is really compressing multiples … more so than anything idiosyncratic to what Jassy is doing at the corporate.”

Jassy, who took the helm at Amazon in 2021, sounded off on the corporate’s layoff plans in a press release earlier this month.

“Amazon has weathered uncertain and difficult economies up to now, and we are going to proceed to accomplish that,” Jassy wrote on Jan. 4. “These changes will help us pursue our long-term opportunities with a stronger cost structure; nevertheless, I’m also optimistic that we’ll be inventive, resourceful, and scrappy on this time after we’re not hiring expansively and eliminating some roles. Corporations that last a protracted time undergo different phases. They’re not in heavy people expansion mode yearly.”

Boxes able to be delivered are seen during Cyber Monday on the Amazon fulfilment centre in Robbinsville Township in Recent Jersey, U.S., November 28, 2022. REUTERS/Eduardo Munoz

‘Definitely still an AWS story’

So, where does Jones think Amazon will go from here? The important thing to a successful 2023 for Amazon is for the corporate’s retail business to select up some steam, while the corporate’s booming cloud unit Amazon Web Services (AWS) boosts its growth.

“It’s definitely still an AWS story,” said Jones. “I mean, we still need to see retail work. I believe promoting is under-appreciated, but heading right into a recession it’s hard to love promoting going into 2023. So, we really want to see AWS start re-accelerating. We want to see estimates start increasing from the retail segment.”

The reality is, the macro must even out before we all know Amazon’s next moves will seem like.

“We want to bottom out by way of estimates and get more visibility on the macro situation,” said Jones. “Is the Fed going to proceed to extend rates and by how much? I believe once we get some visibility into the associated fee of capital, where rates are going, that is when investors can start to select their heads up and take into consideration what the back half of ’23 and ’24 looks like.”

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.

Click here for the newest trending stock tickers of the Yahoo Finance platform.

Read the newest financial and business news from Yahoo Finance.

Download the Yahoo Finance app for Apple or Android.

Follow Yahoo Finance on Twitter, Facebook, Instagram, LinkedIn, and YouTube.

Leave a Comment

Copyright © 2024. All Rights Reserved. Finapress | Flytonic Theme by Flytonic.