Amazon shares have soared more than 46% this year — and Bank of America thinks there’s “still a lot of room for growth (and upside) ahead.” The bank hiked its price target to $154 from $139, which implies 24.7% upside from where shares closed on Friday. It also reiterated its buy rating in a Monday client note. “We were encouraged by CEO commentary that retail margins could improve beyond pre-pandemic levels (4-5% in US),” wrote analyst Justin Post. “In 1Q, Amazon US retail margins were up 340bps y/y, one of the best quarters in the company’s history for y/y margin improvement,” Post added. However, he noted that on an absolute basis, U.S. margins were still only at 1.2%, underscoring CEO Andy Jassy’s comments that the company has “a chance not just to recover to where we were pre-pandemic in terms of operating margin. … There’s additional upside with some of the opportunities we’ve identified.” Post thinks that, based on margin improvement year-to-date, metrics showing strong leverage and management’s commentary, Amazon’s 2024 U.S. retail margins could reach a range of 4% to 5%. The analyst noted that a 22% year-over-year decline in U.S. retail gasoline prices should aid retail margin improvement. Shipping costs have also declined 4% year-over-year in the first quarter of 2023, Post added, which also contributes to lower Shipping Cost per Unit. Shares were up 0.4% Monday during premarket trading. —CNBC’s Michael Bloom contributed to this report.
