There’s still a lot of good news for Amazon’s (AMZN) stock despite a tough year, Nick Jones, an equity research analyst at JMP Securities, recently told Yahoo Finance Live. video above).
Amazon’s 2022 looks rough, with the company’s stock down over 40% over the course of the year. The company is battling high inflation, rising interest rates and a sluggish advertising market, and recently announced he would increase the number of corporate employee layoffs from 10,000 to 18,000.
Still, according to Jones, Amazon is still heading in the right direction. “We welcome Amazon’s investment in future technology. We want them to invest in growth,” he said. “For us, we don’t think it needs to happen. We like the stock from here today.”
The layoffs aren’t bad news for the company’s prospects, Jones said.
“It’s a very small chunk of their workforce,” he said, because Amazon’s entire company has a workforce of about 300,000 people. “We’re looking at it as, ‘They’re starting to see operating margins.’ This is an area where investors are paying more and more attention. We’re hoping to provide better guidance on the numbers for .We’re focused on this and they’re making the cut.”
Amazon’s guidance is weak for fourth-quarter earnings, with the company expecting to report $140 billion to $148 billion in revenue in October to close out the year, below analyst expectations. .
In response to all the turmoil the company is experiencing, Jones says he believes CEO Andy Jassy is playing his card right, saying he’s caught in the crossfire of a macroeconomic downturn. I’m here.
“You can’t fight the Fed,” he said. “You can’t fight the macro. It’s a very macro Fed-driven market, and I think it’s really compressing the multiples more than the idiosyncrasies of what Jassy is doing at the company.”
Jassy, who took over Amazon in 2021, revealed the company’s plans to cut jobs in a statement earlier this month.
“Amazon has navigated uncertain and difficult economies in the past and will continue to do so,” Jassy said on January 4. “These changes will help us pursue long-term opportunities with a stronger cost structure.” But I’m also hoping that in this time when we’re not doing massive hiring or cutting some roles, we’re going to be creative, resourceful, and crafty. I’m optimistic about it.
“Definitely still talking about AWS.”
Where does Jones think Amazon will go from here? The key to Amazon’s success in 2023 will be its retail business gaining momentum and the company’s fast-growing cloud unit, Amazon.com. Web Services (AWS) will help drive that growth.
“It’s definitely still an AWS story,” says Jones. “I mean, we still want to see retail. I think advertising is undervalued, but I think it’s hard to favor advertising heading into a recession going into 2023. So AWS We should see it start to accelerate again, and see quotes starting to rise from the retail segment.”
The truth is that the macros need to stabilize before we know what Amazon’s next move will be.
“We need to bottom out estimates and get a better picture of the macro picture,” Jones said. “Will the Fed continue to raise rates, and to what extent? Once they have some idea of where interest rates are headed and the cost of capital, investors can lift their heads and start thinking about the second half. I think you can. It looks like a ’23 and a ’24.”
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on her Twitter. @agarfinks.
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