Amazon's robotics push could "unlock billions in savings" that could lead to higher profit margins, a Bank of America Securities analyst said Monday. BofA analyst Justin Post raised his price target for Amazon stock to 248 from 230.
Amazon now has more than "750,000 robots assisting with 75% of customer orders," Post said in a client note Monday. He expects further robotics adoption will help boost efficiency for Amazon's e-commerce operations. Warehouse robotics, as well as delivery drones that Amazon is testing in some markets, could drive $16 billion in annual cost savings by 2032, according to BofA estimates.
Last month, Amazon announced a new warehouse robot called "Vulcan" that it says has a sense of touch to assist with sorting and preparing items.
"Amazon's 2024 retail operating profit margin of 5.4% has made big progress since 2022 and we see long-term potential retail margins at 11%, assuming a 55% margin on advertising, 20% on third-party services, 5% for subscriptions, breakeven first-party, and $10 billion in annual investment spend," Post wrote. "We think robots and drones will increase Amazon's shipping speed advantages, and could add another two points to Amazon's long-term retail margins, helping move first-party (e-commerce business) toward better profitability in a very price-transparent AI world."
The robotics push comes as Amazon has committed to spending roughly $100 billion this year on capital expenditures. That spending is mostly focused on building AI-capable data centers for its Amazon Web Services cloud business. BofA's Post sees crossover potential between the two company initiatives.
"We think spatial awareness that enables robots to sort, pick, and pack could be a significant breakthrough for fulfilment and delivery, and expect Amazon to adopt these technologies well ahead of competitors, aided by AWS' AI capabilities," Post wrote.
Amazon Stock: Cup-With-Handle Pattern
On the stock market today, Amazon stock gained nearly 1% to close at 206.65. Amazon stock rallied 11% in May, its first monthly gain since January. The bounce-back came after President Donald Trump announced a 90-day agreement with China to lower 145% tariffs on Chinese goods to 30%.
Overall, Amazon stock is down 5.8% year-to-date entering trading Monday, and down roughly 15% from an early February all-time high of 242.52.
The IBD MarketSurge pattern recognition tool shows Amazon stock in a cup-with-handle base with a buy point of 214.84. That entry represents a return to a three-month high Amazon reached on May 13.
