Amazon ‘s regional fulfillment center transition could drive more than 30% upside for shares, according to Wells Fargo. Analyst Ken Gawrelski initiated coverage of the e-commerce giant with an overweight rating, saying Wall Street is underestimating the “pace and magnitude” of improved shipping and fulfillment efficiencies at Amazon and recent comments made by CEO Andy Jassy at its annual meeting. AMZN YTD mountain Amazon shares in 2023 The comments show the “regional FC model is already having a meaningful impact to fulfillment and shipping efficiency,” Gawrelski wrote. “We believe annualized fuel and labor savings may have already reached $6.5B, 30% of 2023 consensus [operating income].” He placed a $159 price target on shares, implying more than 31% upside from Wednesday’s closing price. Amazon has surged more than 44% so far in 2023. As inflation eases and Amazon transitions to a smaller fulfillment center footprint, Gawrelski expects margins to return to 2018 levels by 2025. He also expects Amazon Web Services growth to re-accelerate later this year, forecasting a 15% rate come December. “We see North America retail margins improving more quickly than consensus with 2018 margins returning by 2025, implying significant OI upside,” he said. “We expect AWS is bottoming in 3Q and should reaccelerate to more healthy growth rates exiting 2023, dampening the AWS bear case.” Wells Fargo dropped coverage of Amazon when an analyst left earlier this year. — CNBC’s Michael Bloom contributed reporting.