Investing.com - Bank of America (NYSE:BAC) (BofA) has reiterated its "Buy" rating for Amazon.com Inc (NASDAQ:AMZN) in a research note on Wednesday, highlighting that there's still room for improvement in Amazon's logistics efficiency.
Amazon has successfully positioned themselves as a logistics powerhouse, with BofA projecting over 9 billion package deliveries globally this year. This puts Amazon ahead of UPS, making it potentially the largest US shipper. Delivery speed has also seen significant improvements, with about 25% of units now delivered on the same or next day.
However, even with substantial efficiency improvements in 2023, all five of the logistics utilization metrics tracked by BofA, including units per square foot, remain below 2018 levels. This suggests there's still potential for further efficiency gains.
BofA identifies six key drivers for future efficiency improvements. These include the introduction of Inbound Cross Docks and new Consolidation Centers, initiatives to enhance inventory network distribution, a higher share of units from new Same-Day sites, expanded robotics integration in fulfillment centers, decelerating square footage growth, and traction for third-party shipping services and Supply Chain by Amazon.
Despite notable margin leverage in the first quarter of 2024, BofA argues that the Street's retail margin projections remain conservative. BofA believes Amazon can drive upside, given another year of limited fulfilment expansion in 2024.
However, risks include a slowdown in AWS or Ads revenue that could offset logistics leverage or a new investment cycle.
BofA raised its price objective for Amazon to $220 (up from $210) based on higher retail multiples in its sum-of-the-parts valuation. Amazon remains BofA's top pick for large-cap/FANG in 2024.