Amazon.com Inc. has announced hundreds of thousands of job openings in recent weeks, putting labor costs and related pressures into focus for some analysts heading into their third-quarter earnings review.
The e-commerce giant is scheduled to report quarterly earnings on Thursday after the closing bell.
Amazon /zigman2/quotes/210331248/composite AMZN -0.0037% has announced that it’s looking for 150,000 seasonal hires , as well as 40,000 corporate and tech workers and 125,000 fulfillment and transportation workers .
Amazon, like many companies in the consumer space, has enhanced pay and benefits to attract and retain talent in a tight labor market.
Credit Suisse analysts say hiring will likely enhance fulfillment services, but it will also be pricey.
“As we further anticipate global logistics headwinds do not abate until mid-22, our EBIT (earnings before interest and taxes) estimates for the second half of 2021 and 2022 decrease accordingly and reflect a scenario in which Amazon has spent roughly $53 billion in Capex and further taken on incremental expenses without showing potential wallet share gains through greater service levels in the form of faster deliveries across a wider array of SKUs [stock-keeping units],” analysts led by Stephen Ju wrote in a note.
In terms of supply-chain challenges that could hamper inventory levels across the consumer category, Credit Suisse is upbeat about Amazon’s ability to manage those hurdles.
“We believe that Amazon was already leaning on vendors to send in additional inventory even before the brunt of the pandemic had arrived in its operating regions last year,” analysts said.
Credit Suisse notes that Amazon’s inventory turns more quickly than its competitors.
“Hence, it is likely this period of operational challenges will see Amazon pick up additional share relative to the competition through higher availability in additionto the aforementioned better service.”
Credit Suisse rates Amazon stock at outperform with a $4,200 price target, down recently from $4,700, due to fulfillment and shipping expenses.
More generally across e-commerce, KeyBanc Capital Markets says seasonal hiring will be tough this year.
“While the expiration of enhanced unemployment and higher vaccination rates have improved the labor situation since the second quarter, it is clear that seasonal hiring may be pressured across our coverage,” analysts led by Edward Yruma wrote.
KeyBanc rates Amazon stock at overweight with a $4,000 price target.
Amazon has an average buy stock rating with an average target price of $4,148.11, according to 52 analysts polled by FactSet.
Here’s what investors should know heading into Amazon’s third-quarter earnings:
Earnings: The FactSet consensus is for earnings per share of $8.90, down from $12.37 last year.