Morgan Stanley Analyst Sees Efficiency Upside for Amazon, Predicts 20% - 60% Stock Price Upside

Morgan Stanley analyst Brian Nowak has an Overweight rating on Amazon.Com Inc 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. 

Also Read: Amazon's Enhanced Shopping Features: A Challenge to Google and Pinterest

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.