Amazon (AMZN) target lifted as 'harvest mode' expected to support stock outperformance - Jefferies

Jefferies analyst Brent Thill raised the firm's price target for Amazon (NASDAQ: AMZN) to $190 from $175 per share in a note Thursday, maintaining a Buy rating on the stock.

Thill told investors that the recent layoffs signal to them that AMZN is committed to "Harvest Mode" as they continue to optimize the cost structure. The "continued focus on Harvest Mode" is expected to support all-time high margins and stock outperformance in 2024.

"AMZN remains committed to driving cost efficiency in 2024 with recent layoffs across Twitch (unprofitable) and the broader Amazon video team," said Thill. "We see faster growth in AMZN's highest margin businesses (Advertising / AWS), NA regionalization efforts, and continued cost rationalizations as key drivers to AMZN achieving record Op Margins of 7.8% in FY24."

In addition, Jefferies believes the Prime Video advertising launch serves as the first major monetization of Amazon's video asset.

"We expect that the upcoming U.S. Prime Video advertising launch will have lasting impacts on the streaming industry and will provide the strongest form of monetization of AMZN's streaming asset," added Thill. "We believe AMZN's broad advertising inventory and strong first-party data will serve as a competitive advantage as AMZN scales its streaming advertising business."

"In Q4, we expect sales growth will decelerate to 11% (from 12.5% in Q3) as Op Margin improves 460bps y/y to 6.4%," stated the analyst.

By Sam Boughedda

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