{"id":21668,"date":"2023-06-12T16:52:08","date_gmt":"2023-06-12T20:52:08","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/amazon-can-reverse-its-recent-margin-deterioration-in-a-big-way-says-bofa\/"},"modified":"2023-06-12T16:52:09","modified_gmt":"2023-06-12T20:52:09","slug":"amazon-can-reverse-its-recent-margin-deterioration-in-a-big-way-says-bofa","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=21668","title":{"rendered":"Amazon can reverse its recent margin \u2018deterioration\u2019 in a big way, says BofA"},"content":{"rendered":"
\n

Amazon.com Inc. has seen \u201cdeterioration\u201d on a key metric relative to 2020, but the company\u2019s past growing pains could translate to underappreciated opportunities. <\/p>\n

That\u2019s the view of BofA Securities analyst Justin Post, who saw \u201ca lot of room for growth (and upside) ahead\u201d as Amazon
\n AMZN,
\n +2.54%<\/bg-quote>
\n looks to become more efficient with its retail business. <\/p>\n

\n

Wall Street has \u201crelatively limited\u201d expectations for Amazon to improve retail margins, according to Post, who noted the consensus view implied that margins this year only get about 1.4 points better than last year, factoring in the improvements that the company already saw in the first quarter. <\/p>\n

Plus, \u201cStreet estimates at 1 [point] of retail margin expansion in 2024 seem conservative given drivers from here,\u201d he added. Post was \u201cencouraged by CEO commentary that retail margins could improve beyond pre-pandemic levels (4-5% in the U.S.).\u201d<\/p>\n

Read: Amazon\u2019s stock rallies as analyst says Wall Street doesn\u2019t give it enough credit<\/strong><\/p>\n

Amazon\u2019s retail margins came under pressure during the pandemic as the e-commerce giant doubled down on investments, pouring money into fulfillment and transportation initiatives. <\/p>\n

\u201cThe unprecedented investment led to deteriorating efficiency, with noticeable declines\u00a0in utilization metrics\u00a0such as\u00a0Units sold per Square Foot,\u201d Post wrote. \u201cHowever, these metrics improved significantly in Q1, and while\u00a0\u201923 margins should be much improved vs\u00a0\u201922, we think there is room for margin expansion and upside in\u00a0\u201924.\u201d<\/p>\n

Don\u2019t miss: Amazon\u2019s stock could be a sleepy AI play, according to UBS<\/strong><\/p>\n

Post saw five ways Amazon could boost retail margins from here: \u201clogistics optimization, regionalization, advertising growth, new fees and robotics.\u201d<\/p>\n

He noted that the company has closed some facilities and exited certain new projects, signaling that the company is taking a more efficient approach to logistics. Further, Amazon is in the midst of moving to a regionalized system from a national network, a move that could reduce Amazon\u2019s shipping costs by cutting back on the need for national shipping. <\/p>\n

Post was also upbeat about Amazon\u2019s ability to reap the financial rewards of its budding advertising prowess. The company\u2019s advertising business likely is of greater interest to marketers nowadays given privacy-related changes from Apple Inc.
\n AAPL,
\n +1.56%<\/bg-quote>
\n that limit third-party tracking. <\/p>\n

\u201cWith greater logistics efficiency,\u00a0we think more advertising revenue profit\u00a0could\u00a0flow through to the bottom line,\u201d Post wrote. <\/p>\n

See also: Amazon needs a \u2018significant amount of self-help\u2019 to boost its stock, says analyst<\/strong><\/p>\n

Additionally, he thought the company is taking a rational approach to consumer fees, having recently upped the spending threshold required for customers to obtain free grocery delivery, for example. The company has also increased seller fees in another potential margin-enhancing move.<\/p>\n

Finally, he was optimistic about the company\u2019s potential to drive efficiencies through robotics. <\/p>\n

\u201cAdvanced robotics should enable greater capacity and throughput from the existing employee base,\u201d he wrote, and the company has compelling newer initiatives, including one that uses computer vision \u201cto detect \u2018millions\u2019 of items in Amazon\u2019s product catalogue, representing about 65% of existing inventory.\u201d Currently, the process of getting items from shelves and packing them up is \u201chighly manual.\u201d <\/p>\n

Post boosted his price objective on Amazon shares in Monday\u2019s note to clients, while keeping his buy rating.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Amazon.com Inc. has seen \u201cdeterioration\u201d on a key metric relative to 2020, but the company\u2019s past growing pains could translate to underappreciated opportunities. That\u2019s the view of BofA Securities analyst Justin Post, who saw \u201ca lot of room for growth (and upside) ahead\u201d as Amazon AMZN, +2.54% looks to become more efficient with its retail […]<\/p>\n","protected":false},"author":1,"featured_media":21669,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-21668","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nAmazon can reverse its recent margin \u2018deterioration\u2019 in a big way, says BofA | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Amazon.com Inc. has seen \u201cdeterioration\u201d on a key metric relative to 2020, but the company\u2019s past growing pains could translate to underappreciated\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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