Analysts cheered stabilizing AWS growth, improving retail margins and progress on cutting costs.
"Amazon fired on all cylinders: AWS finally stabilizing and now a coiled spring; Retail performance hanging in with weakened consumer; N. American retail margins are back to pre-pandemic levels and accelerating alongside compressing fulfillment windows — impressive; and aggregate operating profits are up and to the right," said Bernstein analysts, who maintain an outperform rating on Amazon's stock, in a Friday research note.
Analysts were also encouraged by Amazon executives' commentary about growing efficiencies in its retail business. Amazon has taken steps to trim expenses in its fulfillment network by shifting to a regional model instead of a national "hub-and-spoke" strategy. The company says that has sped up deliveries, while also saving costs.
Morgan Stanley analysts characterized the shift as the "next retail flywheel" for Amazon. The firm has an overweight rating on Amazon's shares. "The fact that Amazon now sees faster speed equal lower cost when they have the right underlying infrastructure ," the analysts wrote, noting that Amazon's plan to expand that business "is one of the most important points this quarter."
"This is because one-day/same-day has historically led to higher conversion and consumer spend growth which, when combined with better unit economics, may mean AMZN is entering a period of faster sustained N. America retail growth and improving profitability ," the Morgan Stanley analysts said.
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