There’s still a lot to like about Amazon (AMZN), although the company’s year has been difficult, equity research analyst at GMB Securities Nick Jones tells Yahoo Finance Live (video above).
Amazon has had a rough 2022, as the company’s stock is down more than 40% over the year. The company has been battling high inflation, rising rates, and a slow advertising market, and recently announced that it would increase the number of layoffs it was making in its corporate workforce from 10,000 to 18,000.
However, Amazon is still headed in the right direction according to Jones. “We like Amazon’s investment in future technology, and we like them investing in growth,” he said. “For us, we don’t think it should happen. We love stocks from here, today.”
Jones said the layoffs are not bad news for the company’s outlook.
“It’s a very small part of their workforce,” he said. Amazon’s total workforce is about 300,000 individuals. “We’re looking at it as ‘starting to look at operating income.’ That’s an area that investors are increasingly looking at. They want to see Amazon give better guidance to those numbers as we go through each quarter. So while we don’t think it will really perform To move the needle physically, we like that we’re focused on this and they’re making cuts.”
Heading into fourth-quarter earnings, Amazon’s guidance has been weak, the company said in October it was expected to report revenue of between $140 billion and $148 billion to close the year, missing analyst expectations.
For all the company’s turmoil, Jones believes CEO Andy Jassy is playing his cards right, saying Jassy has been caught in the crossfire of the overall economic downturn.
He said, “You can’t fight the Fed.” “You can’t fight macroeconomics, and I think that’s a very large Fed-driven market, and that really compresses multiples … more than anything specific to what Jassy does in the company.”
Jesse, who took over at Amazon in 2021, spoke about plans to lay off the company in a statement earlier this month.
“Amazon has navigated difficult and uncertain economics in the past, and we will continue to do so,” Jazzy said books on January 4 “These changes will help us pursue our long-term opportunities with a stronger cost structure; however, I’m also optimistic that we’ll be innovative, resourceful, and stumbling block in a time when we’re not hiring at scale and eliminating some roles. Going through businesses that last For a long time with different stages. They are not in the position of expanding heavy people every year.”
“Definitely still an AWS story”
So where does Jones think Amazon will go from here? The key to a successful 2023 for Amazon is for the company’s retail business to pick up some steam, while the company’s burgeoning cloud unit Amazon Web Services (AWS) fuels its growth.
“It’s definitely still the story of AWS,” said Jones. “I mean, we’d still like to see the retail business. I think advertising is underappreciated, but heading into a recession it’s hard to love advertising going into 2023. So, we really need to see AWS start to accelerate. We need to see estimates It starts to increase from the retail sector.”
The truth is, the macro needs to be ironed out before we know what Amazon’s next moves will look like.
“We need to get to the bottom of the estimates and get a clearer view of the macro situation,” Jones said. “Is the Fed going to continue to raise rates and to what extent? I think once we get some clarity on the cost of capital, where rates are going, then investors can start to raise their heads and think about what the back half of ’23 and ’24 look like. “
Allie Garfinkle is Senior Technology Correspondent at Yahoo Finance. Follow her on Twitter at @employee.