$Amazon (AMZN.US)$ PT Raised to $217 at Wells Fargo, 'Adding...

$Amazon(AMZN.US)$ PT Raised to $217 at Wells Fargo, 'Adding to the Q2'24 Tactical Ideas List'

Maintain 1Q24 OI of $12.4B vs. Street $11.0B, raise 2Q OI to $14.5B (vs. Street $12.6B) and expect 2Q guide of $10.0-14.0B. Believe restructured FBA fees and cost externalization driven by FBA inventory placement fees will drive $1.2B of incremental OI vs. 1Q24. In addition to the FBA fee change, we expect retail and AWS q/q rev growth to contribute $725M and $350M (10% & 31% q/q inc. margin) of incremental OI vs. 1Q. Accordingly, we raise 2Q OI by ~$750M (6%) to $14.5B (15% above Street). Project 1Q24 rev 1% above Street, 2Q guide of $146B-$151B (+9-12% y/y) vs. WFSe / Street of $152B / $150B. Maintain our top-line estimates, but skew positively on 1Q NA retail revenue. WFSe 1Q NA rev +11.6% y/y (1% above Street), as supported by card data, which implies a 140 bp decel from 13.0% in 4Q23. We note app DAUs inflected positively in late-March in conjunction with AMZN's first 'Big Spring' 6-day sale. WFS cloud checks support AWS accel to +15% / +16% y/y in 1Q / 2Q, in-line w/ Street. AWS checks point to cont'd 1Q accel driven by significantly moderating optimization, cloud migration accel, and GenAI workloads; maintain 1Q24, +15% y/y, in line w/Street. Checks indicate the cost benefits from further optimizations are moderating significantly. Believe revenue recognized from enterprise cloud migrations still relatively tepid in 1Q but commitments in place for 2H acceleration. View '24 to be a year of cyclical recovery, while Enterprise AI likely more of a focus in '25/'26. WFSe $5.2B of annualized NA OI accretion from FBA fee restructuring. As we previously estimated, we see a $0.50 lift in NA FBA profitability / unit driven by a $0.15/unit fee increase and externalizing an add'l ~$0.35 / unit by incentivizing sellers to distribute inventory through the AMZN network themselves. Seller feedback indicates a shift to SFP as result of the fee changes; WFSe SFP units are ~$1.70 more profitable / unit than FBA. New FBA fee structure to be fully implemented on 04/01.