Analyst blasts Amazon for running a ‘not-for-profit enterprise’

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Written on Dec 22, 2022

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Laura Martin lowers her estimates for Amazon.com Inc's fiscal 2023.
The analyst says it will take more than layoffs for the stock to recover.
Amazon stock price is now below its low at the peak of the pandemic.

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Amazon.com Inc (NASDAQ: AMZN) is down another 5.0% on Thursday after a Needham analyst blasted its management for running a not-for-profit enterprise.

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Needham analyst lowers estimates for Amazon’s FY23

Laura Martin forecasts a whopping $510 billion in revenue for the tech behemoth. But she’s thoroughly disappointed in its operating margin that she expects will sit at only 2.0% this year.

Costs will represent nearly $500 billion in FY222. Why is AMZN running a not-for-profit enterprise? At $510B of annual revs, AMZN clearly has scale. Is AMZN in a lousy business or do they do a lousy job running it?

The Needham analyst now expects Amazon to earn $1.85 a share in its financial 2023 – about 15% less than her previous forecast. She trimmed her sales estimate for the next year by 5.0% as well.

For the year, Amazon stock is down more than 50% at writing.

What would it take for the Amazon stock to recover?

In November, Amazon.com Inc said it had started executing layoffs and planned on lowering its headcount by 3.0% to trim costs in the midst of a challenging macroeconomic environment (source).

But the job cuts, as per Laura Martin, may not be enough to sufficiently please shareholders. In a note this morning, she said:

AMZN states that they are focused on cost-cutting. We don’t object. However, investors also want AMZN to demonstrate upside pricing power in 2023, since cost-cutting has limits to driving valuation upside.

In its latest reported quarter, the Nasdaq-listed firm had $400 million of operating loss from its North America segment. Amazon stock is now trading below the low it made at the peak of the pandemic.