Amazon remains top pick at Morgan Stanley with AWS bottom in sight
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Morgan Stanley reiterated its bullish outlook for Amazon (NASDAQ:AMZN) in a note addressing the key bull and bear debates on the stock.
Among the key issues for the stock in 2023 is slowing AWS growth. According to equity analyst Brian Nowak, this question mark should begin to fade as the year progresses. Per the bankâs analysis âAWS revenue will trough in the mid single digit [year over year] growth range by end of 2Q, early 3Qâ before snapping back to modestly stronger growth in Q4. He added that the backlog for the cloud segment continues to grow steadily, reinforcing his confidence in the name. 
âLooking to 2024 we model AWS to grow ~19% year over year,â he advised. âWe also continue to look at the sequential dollars added to AWS, which we believe are instructional when analyzing this business built around client and spend/client sequential growth.â
Nowak also expects the tech giant to remain cautious on capital expenditures in cloud, much the same as it has pulled back on moonshot bets and retail footprint expansion. 
On the retail front, Nowak also anticipates a tighter focus on the bottom line as fulfillment and shipping cost per unit continue to com down. Nowak forecast efficiency improvements to help lead the North American retail segment to reach a 4% EBIT margin by the close of 2023.
âWe see meaningful upward revisions to EBIT from here driven by continued improvements in retail EBIT,â Nowak concluded. 
To be sure, Nowak expressed some uncertainty about the trajectory of the international retail business. He warned that more severe macro weakness in many markets outside the US and efforts to break into lower margin emerging markets are likely to weigh on results.
âIn our view, for International EBIT to improve, macro needs to improve in the UK, Germany, and Japan (which we will look to happen over the course of â23 and into â24) and/or AMZNâs emerging markets need to grow and scale their way out of losses (which will take time),â Nowak explained.
Nonetheless, he assigned the stock a $150 price target and reiterated an Overweight rating despite the cautious view on international retail sales. He also reiterated that the stock remains a Top Pick for the bank.
Read more on Amazonâs aims to expand its brick and mortar base.