By Sam Boughedda
Cowen analysts raised the firm's price target on Amazon (NASDAQ:AMZN) to $160 from $150 per share, maintaining an Outperform rating.
The analysts said the firm believes various rising costs, including employment, inflation, and segment investments, coupled with the FX impact on revenue, should drive an estimated 2022 operating loss of $26.7 billion for Amazon, excluding AWS & Adv.
"Per our estimates, AMZN will generate '22 Operating Income of $12.1BN, down ~51% y/y driven by spiraling costs outside of AWS and the advertising segment. We estimate the "rest of the business" '22 Operating Loss of (~$26.7BN) after backing out AWS Operating Income of $23.6BN and Advertising Operating Income of $15.2BN (we assume AMZN's ad biz has a ~40% Operating margin, tracking near META's Family of Apps Operating margins)," the analysts wrote.
However, looking ahead, they believe headwinds should start to subside, driving margin upside compared to consensus.
"Looking Back in Order to Look Ahead: In '18 and '19, AMZN's "rest of the business" generated Operating Income of $1.9BN and $0.8BN, per our estimates, and in first year of the pandemic in '20, the "rest of the business" posted Operating Income of $2.2BN, despite various COVID costs. The profit profile for the "rest of the business" started to swing negative in 2H21, when the "rest of the business" incurred Operating Losses of ($3.1BN) and ($5.7BN) in 3Q21 and 4Q21. That led into '22, where we estimate the "rest of the business" has incurred Operating losses of (~$18.6BN) year to date through 3Q22, or roughly ($6BN) of losses per quarter; for FY22, we forecast (~$26.7BN) in "rest of biz" Operating Losses," the analysts added.