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Even as Amazon.com Inc. sheds thousands of employees, analysts say the online retailer will need to cut even more to lift up margins in its ecommerce business, as profitability per corporate employee lags behind its Big-Tech peers.
“Following our deep dive into AMZN expenses, we believe more layoffs are necessary for eCommerce to become meaningfully profitable,” Oppenheimer analysts said in a research note on Thursday.
They said Amazon’s sagging share price could be chalked up to market share loss to Microsoft Corp.
MSFT,
— whose Azure cloud-services platform competes with Amazon’s
AMZN,
AWS — and lack of profitability in Amazon’s ecommerce segment. The analysts said investors were “overly bearish” on AWS.
The analysts lowered their price target on Amazon to $125 from $135. But they maintained their version of a buy rating on the stock, saying “we believe headcount can be right-sized under new CEO Jassy.”
Andy Jassy became Amazon’s chief executive in 2021. Amazon last month said it would lay off 9,000 people after detailing plans to lay off more than 18,000 employees in January, following the pandemic’s digital boom and bust.
Oppenheimer’s call for deeper cuts wouldn’t be the first from an analyst. After Amazon outlined plans to cut 18,000 people from its ranks early this year, Morgan Stanley analysts said the company, along with the tech industry overall, could tighten up costs even more.
The Oppenheimer analysts also said that Amazon’s profit per non-warehouse employee trailed companies like Alphabet Inc.
GOOGL,
Microsoft and Meta Platforms Inc.
META,
Earnings per Amazon corporate employee — before interest and taxes — stood at around $60,000 before the pandemic, rose close to $75,000 during the pandemic, and fell to around $32,000 last year, the analysts said. Those earnings for its three tech peers were in the six figures over that time, the analysts said.
Shares of Amazon were up 0.5% on Thursday. The stock is down 36% over the past 12 months. The S&P 500 index
SPX,
has fallen 8.6% over that period.
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