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Amazon (AMZN) has seen a significant improvement in its North American business profitability, resulting in solid performance, and a report on the revision of its raised target price has been released.
KB Securities has proposed a target price of $209, a 22.9% increase from the previous target price for Amazon, reflecting profitability improvements confirmed in its North American business in the second half of 2023, recovery in the growth of AWS, and profitability improvements. The investment opinion remained as a buy.
In the fourth quarter of last year, Amazon’s operating profit surged 382.6% from the previous year to $13.2 billion, exceeding market consensus. The conversion of the logistics network into a regional unit in North America and the expansion of advertising revenue are analyzed as the reasons for the increase in operating profit.
Gang Seong Jin, a researcher at KB Securities, explained, “Amazon is restructuring its logistics network to focus on smaller regions, reducing delivery distances. As a result, delivery costs are saved, and customer satisfaction with delivery speed is also increasing.”
Advertising revenue recorded a sharp increase of 26.8% from last year to $14.7 billion. As a result, the operating profit of the North American business turned into a surplus of $6.5 billion compared to a year ago, and the operating profit margin recorded 6.1%, rising for seven consecutive quarters compared to the previous quarter.
In addition, Amazon guided for the first quarter of this year, with sales of $138 to $143.5 billion and operating profit of $8 to $12 billion.
Researcher Gang Seong Jin said, “This is consistent with KB Securities’ forecast and market consensus,” and predicted that “the operating profit will reach $54.4 billion in 2024.”
The effects of the network conversion are expected to continue in 2024, and the AWS business, which has regained its growth rate, is also expected to contribute to the increase in operating profit.
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