After Bezos resigns, can Amazon still buy it?

Amazon may be the best stock on earth

Amazon’s stock has actually been flat in the past year, rising only 6% so far this year, while the S&P 500 index has risen 15%. Investors are cautious for several reasons, including the replacement of the CEO.

Jeff Bezos, the founder of, will resign as CEO of the company on July 5, which is Amazon’s 27th birthday. He will hand over the baton to Andy Jassy, ​​an veteran employee who has worked for Amazon for 24 years. He established and operated Amazon Cloud Services (AWS), the company’s dominant cloud computing business. .

After Bezos resigns, can Amazon still buy it?

Andy Jassy will succeed Jeff Bezos as Amazon’s CEO

As Wall Street analysts like to say, Jassy faces “difficult comparisons.” Bezos has always been a difficult role to keep up with, and he is retiring from the top position (if all goes well for his space journey later this month, he will remain the executive chairman and executive chairman of this online retailer). The largest shareholder.)

Amazon’s (AMZN) corporate business shines during the COVID – 19 pandemic . In the first quarter of this year, the company’s sales increased by 44% year-on-year, the best quarterly growth since 2011, with a net profit of US$8.1 billion, the highest quarterly profit ever. With the surge in demand, Amazon hired more than 500,000 people in 2020, bringing the total number of employees to more than 1.3 million.

In the first quarter, sales of Amazon cloud services increased by 32% to $13.5 billion, and the annual average sales far exceeded $50 billion. This makes Amazon one of the largest enterprise computing companies in the world, surpassing Oracle, SAP and

Amazon’s online retail business revenue was 52.9 billion U.S. dollars, an increase of 41%. Third-party sales services, such as distribution services, increased by 60% to $23.7 billion (roughly equivalent to the size of FedEx). Subscription services, mainly Amazon Prime members, had revenues of US$7.6 billion, an increase of 36%, and estimated annual revenues of more than US$30 billion (slightly higher than Netflix). “Other” revenue (mainly advertising revenue) reached US$6.9 billion, an increase of 77%.

Amazon’s current market capitalization is $1.7 trillion, second only to Apple and Microsoft among listed companies in the United States .

Despite the gratifying numbers, Amazon’s stock has actually been mediocre in the past year. So far this year has only risen by 6%, while the S&P 500 has risen by 15%. Investors are cautious for several reasons, including the replacement of the CEO. Large technology companies have a mixed record of replacing founder CEOs.

The success story is Apple’s CEO Tim Cook, who took over the top position from Steve Jobs in 2011. Since he took office, Apple’s stock price has risen 1,000%.

Microsoft is a warning example. In January 2000, Steve Ballmer succeeded Bill Gates as the CEO of Microsoft and stayed in this position for 14 years. Under Ballmer’s helm, Microsoft’s sales have tripled, but the stock price has not increased.

There are also concerns that Amazon’s e-commerce growth may slow down as the economy reopens. The challenge for Jassy is to achieve a soft landing and promote growth in other areas to offset the slowdown in e-tailing.

At the same time, regulatory review remains a resistance. Amazon’s $8.5 billion acquisition of MGM Films has attracted great attention from regulators and legislators. The newly appointed chairman of the Federal Trade Commission, Lina Khan, has had her career partly driven by her focus on Amazon’s market dominance. In 2017, she published an article called “Amazon’s trastral Paradox” in the Yale Law Review, which is now a famous article.

Last week, Amazon formally asked Khan to avoid antitrust matters related to the company. Amazon may get what it wants, but the doubts Amazon has to raise also highlight the regulatory risks it currently faces.

The worst scenario—a series of bills under consideration by the US House of Representatives—reflects this situation—may force Amazon to abandon the business that directly competes with customers, that is, its third-party retailer, which may end Amazon’s own sales. The ability to have branded products.

The more subtle risk is that increased regulatory focus may hinder Amazon’s ability to achieve growth through acquisitions, and the results of the MGM transaction will become an important test case.

Amazon also faces ongoing labor issues, even in Bessemer, Alabama, where its factory rejected a union vote. This company is vigorously promoting to become “the best employer on earth” and “the safest place to work on earth”. Nonetheless, Amazon may still be the target of major unions. At its annual meeting last month, the Truck Drivers Union approved a measure to support the widespread promotion of Amazon workers’ participation in the union.

As for stocks, I have previously pointed out that Amazon may be the best stock on the planet, especially in the long run. In my column on April 19, I mentioned a comprehensive analysis report by Jefferies analyst Brent Thill, which stated that Amazon’s market value in three years is $3 trillion. This estimate includes the expected value of Amazon’s cloud services of USD 1.2 trillion, Amazon’s core retail business of USD 1 trillion, and the advertising business of USD 600 billion. In addition, there are other exciting pieces, such as the fast-growing logistics department, and the company’s medical services department, which is still in its infancy.

Even if Amazon falls into a bear market scenario-forced to split-if you do the math, you will find that it looks very optimistic. If the Amazon cloud service is an independent listed company, earnings and hot clouds of soft parts company Snowflake (SNOW) matched, then its market value will exceed $ 4 trillion. This is of course absurd, but it will give you a sense of the size and power of Amazon’s underlying assets. For long-term investors, Amazon under Jassy’s rule is still an obvious buy.

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