With a share price of $100, Amazon.com (AMZN -1.64%) stock is still down by a whopping 46% from its all-time high of $186, reached in mid-2021. Like many tech companies, it shed much of its value in 2022 amid macroeconomic challenges that are still ongoing. That said, Amazon's long-term thesis remains sound, and cost-cutting efforts can help position the company to bounce back when conditions improve. 

The pandemic boom became the pandemic doom 

Amazon was one of the beneficiaries of the stay-at-home boom triggered by the COVID-19 pandemic. Lockdowns and movement restrictions encouraged consumers to shop online while rising cloud adoption accelerated growth in the AWS segment. These tailwinds helped Amazon generate an operating income of $22.9 billion in 2020 and $24.9 billion in 2021, and the stock price soared in response. 

But under the leadership of former CEO Jeff Bezos, Amazon overexpanded as if the boom would last forever, spending too much on new infrastructure and headcount. The number of employees roughly doubled between 2019 and 2020 (to 1.6 million). And coupled with challenges like inflation and cost-cutting among cloud clients, profitability nosedived. In 2022, operating income stood at $12.2 billion -- less than half of the previous year.

Management is undoing the overexpansion 

It's hard to blame Amazon for overexpanding, because there was a widespread belief that pandemic-era trends would last longer than they did. But the good news is that the company's new CEO, Andy Jassy, reacted quickly to get things under control. 

In March, Amazon announced plans to cut 9,000 white-collar employees, mainly from the cloud, advertising, and HR units. If we assume these workers have an average annual salary of $150,000, that could amount to an extra $1.35 billion in savings straight to the bottom line. The cuts follow an earlier round of layoffs that eliminated more than 18,000 positions starting in late 2022, along with various efforts to improve efficiency in the company's logistics network.

Flaming stock chart moving upwards.

Image source: Getty Images.

Cost-cutting can create sustainable value for investors because Amazon's macroeconomic challenges (such as inflation) look temporary. Further, management believes lower spending from its cloud service customers will only last for the next "couple of quarters" because AWS helps its clients store and analyze the data they need to grow. The company can emerge from this challenging period leaner and more profitable than ever.

New growth drivers are on the horizon 

Amazon has several new long-term growth drivers that can help make up for potential softness in its core businesses. Under a new initiative called project Kuiper, the company plans to launch a fleet of Low Earth Orbit satellites designed to provide affordable broadband connections around the world starting in 2024. 

Analysts at Grand View Research believe the global broadband services market is worth $419 billion and with grow at a compound annual growth rate (CAGR) of 9.7%. Further, rivals such as Elon Musk's Starlink have proven the technical and potential commercial viability of the satellite internet business model. Boosting global internet penetration has the added benefit of creating more customers for Amazon's e-commerce operation, which is a nice synergy between the two businesses. 

All in all, there is a lot to be excited about Amazon, and the current stock price weakness looks like an opportunity to buy the dip.