Why Amazon Earnings Can Surge Next Year, Analyst has 5 Reasons
Bernstein analyst Mark Shmulik believes Amazon.com’s profitability will improve dramatically next year.
On Friday, he reiterated his Outperform rating and $160 price target on Amazon (ticker: AMZN ) stock, citing five reasons why the internet giant will post higher operating-profit numbers in 2023.
The analyst admitted investors have been disappointed over the last six quarters, waiting for better profit figures from Amazon. But he predicts that once inflation and raw-material cost pressures subside, the company’s current wave of aggressive cost cutting will pay dividends. His estimate for Amazon’s 2023 operating income is $35.6 billion.
Shmulik’s five drivers for better profits are:
- Prime subscription renewals from U.S. and Europe will boost the bottom line after fee hikes.
- The negative impact from overbuilding capacity and overstaffing will fade.
- Higher ad revenue will come from video content such as NFL games.
- Increasing growth will come from the more-profitable segments like Amazon Web Services and advertising
- Fuel and wage inflation will normalize.
In February, Amazon announced a price hike for its Prime membership annual subscription to $139 from $119 in the U.S.
Amazon stock is up 1.7%, to $132, in early trading Friday. The stock has declined 21% this year, compared with the 23% drop in the Nasdaq Composite.
This article was reported by MarketWatch on Sept 9, 2022.