Shares of Amazon.com, Inc (AMZN  ) are moving to the upside by more than 3% Thursday after a report issued by The Wall Street Journal suggests that the company is seeking to launch an advertising-supported Prime Video streaming service tier to build its ad business further and generate more entertainment revenue.

Analysts at Wells Fargo, meanwhile, told investors in a note that they see further upside for shares, initiating coverage on the stock.

The AMZN Analyst: Ken Gawrelski initiated coverage on Amazon with an Overweight rating, and issued a $159 price target on the stock.

Hidden Opportunities: Gawrelski highlighted comments made by Amazon CEO Andy Jassy at its AGM conference on May 24 which indicated a transition from a national to a regional fulfillment center (FC) model, leading to a 15% drop in the travel distance of items from FCs to customers and a 12% decline in package handling.

The shrinkage in logistics and FC labor costs translates to around $6.5 billion in annual operating income, according to Gawrelski, potentially fueling 30% of the $22 billion Street operating income.

The analyst noted that easing inflation rates, withdrawal of FC construction plans, and the workforce trimming serve as additional operating income tailwinds. Despite lingering labor cost effects, Wells Fargo believes a slowdown is in progress.

AWS's Accelerated Growth: The analyst sees a probable pick-up in AWS growth around August, as it moves past the customer spend rationalization of last year.

Wells Fargo anticipates a 15% growth rate by December, aligning with the first quarter 2024 consensus.

However, Gawrelski highlighted potential roadblocks, including AWS' struggle to effectively package its AI/LLM products for CTOs and a discrepancy between 2024 AWS CAPEX and Nvidia/AMD data center revenue predictions.

AMZN Price Action: Shares of Amazon are trading 2.8% higher to $124.64 at the time of publication on Thursday, according to Benzinga Pro.