2023 is set to be a year of efficiency for Amazon (NASDAQ:AMZN) as the company aims to enhance profitability through cost discipline. Additionally, Amazon is prioritizing its AI (artificial intelligence) strategy to integrate this transformative technology into its Amazon Web Services (AWS) suite of services, solidifying its position in the cloud space. These initiatives have analysts optimistic about the potential upside in AMZN stock.
Let’s take a closer look at Amazon’s initiatives to drive profitability and strengthen its presence in the AI space.
Amazon is implementing a broader cost restructuring strategy by closing down several of its businesses that were not meeting expectations. This includes the discontinuation of its live radio app Amp, which allowed users to act as DJs and provide commentary while playing music tracks. The company has also shuttered its health-focused Halo division and halted tests of its home delivery robot Scout due to slower growth amid macro challenges. Additionally, Amazon has eliminated 27,000 corporate roles as part of its efforts to drive long-term revenue, operating income, and free cash flows, while enhancing return on invested capital.
While focusing on efficiency, Amazon has also made significant investments in AI to accelerate its growth. The company is leveraging Nvidia’s H100 graphics processing units for the development of generative AI applications. Furthermore, Amazon has entered into a strategic collaboration with Anthropic to boost its AI initiatives. Analyst Scott Devitt from Wedbush believes this partnership has the potential to accelerate the adoption and integration of generative AI capabilities for AWS customers, addressing concerns that Amazon has been less proactive than its peers in this area. Devitt reiterated a Buy recommendation on AMZN stock on September 25.
Despite a 45% year-to-date gain in Amazon stock, Wall Street analysts remain bullish about its future prospects. With 40 Buy recommendations and one Hold recommendation in the past three months, Amazon stock has a Strong Buy consensus rating. The average price target for AMZN stock is $176.02, implying a 41.3% upside potential from current levels.
In conclusion, Amazon’s focus on cost-cutting and efficiency, along with its emphasis on AI initiatives, is expected to have a positive impact on its bottom line. The company’s strong position in the cloud space and its commitment to transformative technologies like AI contribute to its optimistic outlook and the Strong Buy consensus rating on TipRanks.