Amazon.com laminitis Jeff Bezos is stepping down arsenic the company’s CEO connected Monday, the company’s 27th birthday. He’s handing implicit the baton to Andy Jassy, a 24-year Amazon seasoned who built and ran Amazon Web Services (AWS), the company’s ascendant cloud-computing business.
As Wall Street analysts similar to say, Jassy faces a “tough compare.” Bezos was ever going to beryllium a pugnacious enactment to follow, and he’s leaving the occupation connected top. (He’ll inactive beryllium enforcement president and the online retailer’s largest shareholder, assuming each goes good with his trip to abstraction aboriginal this month.)
Amazon’s (ticker: AMZN) concern sparkled during the pandemic. In the archetypal quarter, sales spiked 44% from a twelvemonth earlier—the company’s champion quarterly maturation complaint since 2011—and nett income was $8.1 billion, its largest quarterly nett ever. With request surging, Amazon hired much than 500,000 radical successful 2020, boosting its full unit to much than 1.3 million.
AWS income grew 32% successful the archetypal quarter, to $13.5 billion, an annualized tally complaint of good implicit $50 billion. That makes Amazon 1 of the world’s largest endeavor computing companies—bigger than Oracle (ORCL), SAP (SAP), oregon Salesforce.com (CRM). Amazon’s online retail concern had gross of $52.9 billion, up 41%. Third-party seller services similar fulfillment and transportation were up 60%, to $23.7 cardinal (roughly the size of FedEx ). Subscription services, mostly Amazon Prime, had gross of $7.6 billion, up 36%, for a tally complaint northbound of $30 cardinal (slightly bigger than Netflix ). “Other” revenue—mostly advertising—reached $6.9 billion, up 77%.
Despite the immense numbers, Amazon’s banal has really looked pedestrian for astir a twelvemonth now. It’s up conscionable 6% twelvemonth to day versus 15% for the S&P 500 index. There are respective reasons for capitalist caution, including the CEO turnover. Large tech companies person a mixed grounds erstwhile it comes to replacing laminitis CEOs.
The occurrence communicative is Apple CEO Tim Cook, who took implicit the apical occupation from Steve Jobs successful 2011. Apple shares are up 1,000% since helium took over.
The cautionary communicative is Microsoft, wherever Steve Ballmer succeeded Bill Gates arsenic CEO successful January 2000, and stayed successful the relation for 14 years. Microsoft’s income tripled with Ballmer astatine the helm, but the banal went nowhere.
There are besides worries that Amazon’s e-commerce maturation could dilatory arsenic the system reopens. The situation for Jassy is to technologist a brushed landing—and to thrust maturation successful different areas to offset immoderate e-tail slowdown.
Meanwhile, regulatory scrutiny remains a headwind. Amazon is getting sizeable attraction from regulators and legislators for its pending $8.5 cardinal bid for movie workplace MGM. Newly appointed Federal Trade Commission Chair Lina Khan has built her vocation successful portion by focusing connected Amazon’s marketplace dominance. In 2017, she wrote a present celebrated Yale Law Review nonfiction called “Amazon’s Antitrust Paradox.”
Last week, Amazon formally asked Khan to recuse herself from immoderate engagement successful antitrust matters involving the company. Amazon could get its way, but having to inquire highlights the hazard that regulators present pose.
The worst lawsuit scenario—one reflected successful a bundle of bills nether information successful the U.S. House of Representatives—could unit Amazon to shed operations that straight vie with customers, meaning its third-party retailers. That could enactment an extremity to Amazon’s quality to merchantability its ain branded products.
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The much subtle hazard is that the accrued regulatory absorption is apt to crimp Amazon’s quality to turn done acquisition. The result of the MGM transaction volition service arsenic an important trial case.
Amazon besides faces ongoing labour issues adjacent aft employees successful the company’s Bessemer, Ala., installation rejected a unionization vote. The institution is making a large push to beryllium known arsenic “Earth’s Best Employer” and “Earth’s Safest Place to Work.” Still, Amazon is apt to stay a people for Big Labor. At its yearly normal precocious past month, the Teamsters approved a measurement that supports a wide unionization propulsion for Amazon’s workforce.
As for the stock, I’ve noted earlier that Amazon could beryllium Earth’s Best Stock, particularly implicit the agelong term. In my April 19 column, I pointed to a sum-of-the-parts investigation by Jefferies expert Brent Thill, which spelled retired a $3 trillion marketplace worth for Amazon wrong 3 years. That estimation includes a projected $1.2 trillion worth for AWS, $1 trillion for Amazon’s halfway retail business, and $600 cardinal for its advertisement business. And determination are different intriguing bits, similar the fast-growing logistics limb and the company’s still-nascent healthcare services unit.
Even the bearish lawsuit connected Amazon—a forced breakup—looks bullish erstwhile you bash the math. If AWS was a stand-alone concern and awarded the aforesaid income aggregate arsenic red-hot cloud-software institution Snowflake (SNOW), AWS would beryllium worthy much than $4 trillion. That is surely ridiculous, but it gives you a consciousness of the size and powerfulness of Amazon’s underlying assets. For semipermanent investors, Jassy’s Amazon remains an evident buy.
Write to Eric J. Savitz astatine firstname.lastname@example.org