By Sam Boughedda
Reacting to the news that Amazon (NASDAQ:AMZN) has confirmed it is downsizing as it looks to preserve profitability due to macro uncertainty, Citi analysts said the firm believes more reductions are likely coming by early 2023.
The analysts, who have a Buy rating and $145 price target on Amazon shares, said the main divisions impacted by the cuts were primarily Amazon devices and books and a voluntary reduction across its People, Experience, and Technology organization.
"Although the full scope of the RIF is unconfirmed, multiple news outlets have cited ~10K in total job cuts (~3% of its corporate workforce) and we expect Amazon may cut additional positions into 2023 as budgeting plans are finalized and if its voluntary buyout offers aren't accepted by enough employees," wrote the analysts. "We note these cuts follow Amazon's "pause" on incremental corporate hiring on 11/02, wherein the company committed to hire a "meaningful number of people" across its core business and newer initiatives: Prime Video, Alexa, Grocery, Kuiper, Zoox, and Healthcare."
Citi believes the net impact of the layoffs is a 3% reduction of its corporate workforce, with "more reductions likely coming by early 2023, with the size likely dictated by the results of the voluntary reduction."
"The operating environment is clearly becoming more challenging and while we look for continued efficiencies throughout the FC network and the business overall, we believe these cuts should maintain a baseline of profitability, particularly as comps get easier throughout 2023," the analysts concluded.