Morgan Stanley analyst Brian Nowak has an Overweight rating on Amazon.Com Inc (NASDAQ:AMZN) with a price target of $175.
His analysis gives him more confidence in his $4.40 base case FY25 EPS while also painting a path toward ~$5.20 of FY25 EPS in an "efficiency upside" case.
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The analyst notes that AMZN trades at ~27X this "efficiency upside" FY25 EPS, or a 0.6X PEG, a ~15%-75% discount to consumer, retail, and mega-cap tech peers.
Nowak expects AMZN to remain disciplined and ROI-focused on forward investment in core (grocery) and emerging (Kuiper, Echo) projects.
However, he thinks that the path to $5+ of EPS will likely come down to efficiency from 3 main areas, including lower shipping and fulfillment cost/unit through higher square footage/headcount utilization, content cost discipline quickly leading to reported retail profit upside, and 1P merchandise margins still below FY18/FY19 levels, and every 100bp is ~$2 billion of EBIT.
In his view, $5+ of EPS from "efficiency upside" paints the path toward a $160-$230 share price (60% upside).
Price Action: AMZN shares traded higher by 0.25% at $145.22 on the last check Thursday.