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Morgan Stanley kept Amazon (NASDAQ:AMZN) slotted as a top pick on Monday after weighing the impact of the jobforce reduction at the e-commerce giant.
Analyst Brian Nowak and team believe a majority of the 9K employees recently let go were from the AWS business and advertising. The mix of cuts in those areas is anticipated to lead to a higher average savings per employee. After putting pencil to paper, Nowak said annual savings of another $2.2B is expected to add to the prior estimate for 2024 EBIT of $37.2B.
The firm values Amazon (AMZN) using an EV/EBIT multiple and sum-of-the-parts model. The $150 PT reps around ~50% upside and implies paying ~39X to thew new 2024 EBIT target, which works out to a ~30% discount to the long-term average EV/EBIT multiple.
Seeking Alpha analyst Julian Lin also has his eyes on the margin story at Amazon in a new article posted on Monday. Beyond the reduced headcount savings, Lin expects AMZN to reap margin benefits from the multi-decade investments in logistics infrastructure.
Shares of Amazon (AMZN) are up 15.10% on a year-to-date basis, but are still more than 40% off their 52-week high of $170.83.
Dig in further: Amazon is rolling out large corporate layoffs - what does it mean for the stock?