Amazon is on a heater in 2023, with its stock price up a whopping 49% on a year-to-date basis.
That price performance should accelerate due to the e-commerce powerhouse’s rising fulfillment impact.
DON’T MISS: Amazon Stock Has Done Well
Given the “pace and magnitude” of Amazon’s fulfillment center in 2023, Wells Fargo analyst Ken Gawrelski says robust performance in Amazon’s supply chain and shipping center should add around 30% to the company’s share price.
Amazon’s “regional FC model is already having a meaningful impact on fulfillment and shipping efficiency,” Gawrelski noted in a recent research note “We believe annualized fuel and labor savings may have already reached $6.5B, 30% of (operating income) 2023 consensus.”
In his annual shareholder letter, Amazon CEO Andy Jassy said the company invested heavily in the company’s fulfillment center during the COVID lockdowns in 2020 and 2021. That investment was a big reason why the retail giant’s consumer business rose from $245 billion in 2019 to $434 billion in 2022.
“This meant that we had to double the fulfillment center footprint that we’d built over the prior 25 years and substantially accelerate building a last-mile transportation network that’s now the size of UPS (along with a new sortation center network to assist with efficiency and speed when items needed to traverse long distances)—all in the span of about two years,” Jassy stated in the letter.
Amazon has also scaled back warehouse space as the pandemic disappears in the rear-view mirror and more shoppers return to physical stores. Inventory placement has been recalibrated and the company’s fulfillment network now stretches across eight regional fulfillment centers.
All that has streamlined the Amazon fulfillment network and improved efficiencies, Jassy said.
“Each of these regions has broad, relevant selection to operate in a largely self-sufficient way, while still being able to ship nationally when necessary,” he wrote. “We also continue to improve our advanced machine learning algorithms to better predict what customers in various parts of the country will need so that we have the right inventory in the right regions at the right time.”
With Amazon shares currently trading at $125, Gawrelski calls for a $159 price target – that’s about a 30% uptick in share value.
He also sees a significant upside in Amazon Web Services, thanks to accelerated growth.
“We expect AWS is bottoming in 3Q and should reaccelerate to more healthy growth rates exiting 2023, dampening the AWS bear case,” Gawrelski stated.
