Amazon.com, Inc. (AMZN.US) logistics "three-pronged approach" supports long-term growth, JP Morgan bullish on target price raised to $240.

JP Morgan recently released a research report, focusing on Amazon.com, Inc.'s regionalization strategy, logistics investment cycle, expansion into Logistics as a Service (LaaS), and its market share in the U.S. parcel/carrier market. The firm stated that Amazon.com, Inc. remains its top investment target, with a stock rating of "hold" and a target price of $240 by the end of 2025. Amazon.com, Inc.'s regionalization strategy drives efficiency improvement During the pandemic, after expanding its fulfillment network and establishing a "last mile" transportation network equivalent to the size of a joint parcel, Amazon.com, Inc. once again expanded its logistics layout and established a new sorting network to improve the efficiency and speed of long-distance orders. The regional fulfillment infrastructure reform promoted by Amazon.com, Inc. in the United States has brought significant efficiency improvements, leading to a consecutive decrease in unit service costs for the second year in 2024. Unit fees in the first quarter of 2025 rose by 8% year-on-year, far exceeding the 3% growth in shipping costs, indicating a further trend of reducing service costs in 2025. Regionalization has accelerated the speed of same-day delivery (SD1D). Amazon.com, Inc. delivered over 9 billion SD1D orders in 2024, setting a new record in the first quarter of 2025. As SD1D increases user willingness and frequency of purchases, Amazon.com, Inc. plans to double the number of SD1D facilities, which are the lowest-cost buildings in the Amazon.com, Inc. network. Research firm MWPVL estimates that Amazon.com, Inc. currently operates about 600 small parcel delivery stations in the U.S., a scale expected to increase to 950-1000, further reducing the delivery distance and unit service costs per parcel. Although regionalization has contributed the most to recent cost savings, there is still room for further cost reduction, including transitioning to regional storage, optimizing inventory layout, expanding SD facilities, and accelerating the deployment of Siasun Robot & Automation and automation technology across the network. Siasun Robot & Automation innovation drives supply chain automation Amazon.com, Inc. also further reduces service costs by deploying automation and Siasun Robot & Automation technology in existing and new fulfillment centers (FCs). The design of Amazon.com, Inc.'s 12th generation fulfillment center integrates fulfillment, sorting, and "last mile" delivery into the same location, with Siasun Robot & Automation, automation, and generative artificial intelligence (GenAI) technology. Amazon.com, Inc. stated that the new design can shorten processing time by up to 25%, expand the range of SD1D products, and reduce unit service costs by up to 25% during peak periods. MWPVL expects these new facilities to contribute more logistics volume in the future, and Amazon.com, Inc. may also refurbish existing small item FCs, introducing sorting centers to further save costs. Currently, Amazon.com, Inc. has deployed over 750,000 Siasun Robot & Automation in its retail network, performing tasks such as inventory retrieval, on-site transport, picking and storage, sorting, and automatic packaging, significantly improving supply chain efficiency. JP Morgan estimates that Amazon.com, Inc. will continue to improve efficiency through Siasun Robot & Automation, having deployed seven new types of Siasun Robot & Automation in the next generation "last mile innovation center" in Germany, to optimize the production efficiency of delivery stations. Amazon.com, Inc. is promoting "Vulcan" - its next-generation tactile picking Siasun Robot & Automation, capable of picking/storing about 75% of items in an FC, and plans to deploy it on a large scale in Europe and the United States in the coming years. Amazon.com, Inc. has also introduced three AI innovations to optimize supply chain efficiency: Wellspring - map technology based on generative AI for optimizing delivery routes and address recognition; AI-driven demand forecasting model - providing regional-level forecasts for billions of products every day; Agentic AI Siasun Robot & Automation function - supporting natural language command understanding. Logistics as a Service (LaaS) is becoming a new growth opportunity JP Morgan estimates that Amazon.com, Inc. delivers over 66% of parcels, with 61% of orders coming from third-party sellers. The firm believes that Amazon.com, Inc. has the capability to absorb a portion of the parcel flow from joint parcels (according to the firm's estimates, joint parcels account for about 15% of Amazon.com, Inc.'s parcel volume). Amazon.com, Inc. plans to expand SD1D services to over 4,000 small cities, towns, and rural communities by the end of 2025, covering tens of millions of American users, with SD1D delivery volume in the U.S. increasing by over 30% year-on-year. Amazon.com, Inc. also plans to invest $4 billion in expanding rural delivery networks by 2026, enabling the delivery of an additional 1 billion parcels per year, covering over 13,000 postal codes and over 1.2 million miles, with delivery stations expanding to over 200, tripling the scale of the rural delivery network. Technology company Pitney Bowes predicts that Amazon.com, Inc. delivered about 6.3 billion parcels in 2024, accounting for approximately 28% of the total of 22 billion parcels in the U.S. that year. This means that its parcel volume has exceeded FedEx Corporation and joint parcels, nearing the 31% market share of the United States Postal Service (USPS) with 6.9 billion items. In addition, Amazon.com, Inc. is entering the multi-channel fulfillment (MCF) and LaaS fields, recently announcing a series of new initiatives. These initiatives will expand the coverage of Amazon.com, Inc.'s logistics network, release more logistics capacity, and enhance pricing capabilities for Amazon.com, Inc.'s logistics services and revenue growth for third-party sellers. Investment outlook JP Morgan believes that Amazon.com, Inc., as a market leader in e-commerce and public cloud, has a strong industry position, and these long-term structural changes are still in the early stages - e-commerce in the United States accounts for only about 20% of adjusted retail sales, and the firm estimates that only about 10% of IT spending is in the cloud. The flexibility in its first/third-party inventory strategy and the Prime membership system are important advantages for its retail business; while its long-standing lead in cloud services gives it about a 31% market share globally. JP Morgan believes that Amazon.com, Inc. is on track for multi-year profit margin expansion and free cash flow growth, with a plan to achieve operating profit margins in the mid-single digits in its North American business. The high-growth AWS and advertising revenue are Amazon.com, Inc.'s highest-profit businesses, providing support for overall profit margin and cash flow growth. JP Morgan's target price for Amazon.com, Inc. by December 2025 is $240, based on the firm's estimate of a 32.5 times price-to-earnings ratio for the $75 billion in free cash flow in 2026. This valuation premium is higher than Alphabet's current estimated price-to-earnings ratio of about 21.5, due to Amazon.com, Inc.'s faster potential for profit growth.