September 15, 2024

Amazon can keep its record run going due to e-commerce not the cloud

Amazon stock surged to all-time highs Wednesday, and we have every reason to believe that its run can continue as the e-commerce giant becomes the largest U.S. delivery company. Bank of America on Wednesday projected that Amazon will deliver over 9 million packages globally this year. Leveraging the buildout and regionalization of its logistics network, the analysts said delivery speeds have “dramatically improved, with nearly 25% of estimated units now delivered same-or-next day.” BofA estimates Amazon delivered 5.9 million packages domestically in 2023 — more than United Parcel Service and FedEx . Despite “significant improvement” last year, analysts said the efficiency of Amazon’s logistics operations are below 2018 levels for numerous metrics. That gap is part of their argument for “more runway ahead for efficiency gains” and “retail margin leverage upside in 2024.” For those reasons, BofA raised its Amazon price target to $220 per share from $210 and kept its buy rating. BofA called out the importance of Amazon’s retail margin because it has generated more estimated outperformance than its cloud business Amazon Web Services (AWS). Over the past 18 months, Street estimates for retail profit growth for 2025 have grown 219% while AWS profit estimates have dropped by 2%. The analysts estimate that retail will drive 50% of Amazon’s generally accepted accounting principles (GAAP) operating income in 2027 — up from 33% in 2023. Shares of Amazon surged more than 4% on Wednesday — pushing its year-to-date gains to more than 27%. The stock topped a $2 trillion market cap during the session. In April, we raised our Club price target to $200 after Amazon delivered a strong first quarter and what we saw as conservative guidance. On the post-earnings call, CEO Andy Jassy said that Q1 saw the fastest delivery times to Prime customers ever. Amazon is set to report its second quarter next month. AMZN YTD mountain Amazon YTD Management’s focus on further reducing Amazon’s overall cost to serve its e-commerce customers and boosting its logistics efficiencies should be cause for concern among competitors. Jassy said customers look to Amazon for more purchases in categories such as everyday essentials, increasing total spending and purchase frequency. “They’re bringing down the cost of a package, which means they can do more same-day, which means look out CVS [and ] Walgreens ,” Jim said Wednesday. Logistics efficiency has allowed Amazon to carry a high volume of products across different brands and categories that appeal to Prime members. Add on same-day delivery, Jim asked, rhetorically, “Why would you go to the store on the way home when it’s at your home.” He added, “At your door more cheaply, same-day — that has been the holy grail for Amazon. They’re pulling it off.” It’s no surprise, according to Evercore ISI’s annual retail survey, that “faster shipping speeds lead to more frequent buying.” Fifty-one percent of respondents, a survey record, said they opted for Amazon’s same-day delivery option. Among Prime members, it was even higher at 58%. Based on these results, Evercore believes Prime same-day delivery is a “multiplier to purchase frequency and overall spend.” Amazon’s retail prowess will be on display on July 16 and 17, when the company holds its latest Prime Day event. Last year, total online sales in the U.S. for the two days grew more than 6.5% to a record $12.7 billion, according to Adobe Analytics. Amazon said it sold 375 million items during the two-day discount event, up from 300 million in 2022. The latest Wall Street analysis and thoughts from Jim support the idea of further room for Amazon stock to run higher. But for Club members with little to no shares, who are curious where good entry points are for a stock trading at all-time highs, we pointed out some buy levels for Amazon and other big tech players that have had massive runs this year. (Jim Cramer’s Charitable Trust is long AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

An Amazon workers pull a cart of packages for delivery on E 14th Street on July 12, 2022 in New York City.

Michael M. Santiago | Getty Images

Amazon stock surged to all-time highs Wednesday, and we have every reason to believe that its run can continue as the e-commerce giant becomes the largest U.S. delivery company.

Amazon can keep its record run going due to e-commerce not the cloud

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