The significant round of layoffs Amazon (NASDAQ:AMZN) has made this year are said to be a sign that the e-commerce behemoth is trying to be more efficient in the face of generally reduced growth estimates for 2023.
In addition to a round of 18K job cuts disclosed by the business in January, Amazon (AMZN) just announced a reduction of 9K corporate personnel across the AWS, PXT (People, Experience, and Technology), Advertising, and Twitch divisions.
According to Bank of America analyst Justin Post, there are a few different implications for the stock.
“With Bears focusing on AI competition, price reductions from other companies, and future workload optimisation, we do not see the news as being favourable for AWS demand patterns. Bulls predict a considerable drop in y/y AWS cost growth by 3Q may represent $1.6bn of yearly savings, indicating that the cloud sector may already be halfway through the corporate cost optimisation cycle.”
BofA projects additional annualised savings of $1.6 billion, or 7.8% of the company’s projected GAAP operating income of $20.9 billion for 2023. The business’s general assessment of Amazon (AMZN) is that, with costs growing more slowly and the Seattle-based internet titan apparently stopping building on its HQ2 in Arlington, Virginia, margins could recover by Q3. BofA believes Amazon (AMZN) will stay optimistic about the possibility of long-term AWS revenue reacceleration, which might draw tech investors back to the stock, despite the weakening economic situation.
BofA maintained a Buy rating and a $135 price objective for Amazon (AMZN).