Amazon To Investors: "Take A Seat"

Amazon To Investors: "Take A Seat"

almost 4 years ago2 mins

Mentioned in story

Internet giant Amazon’s share price fell 8% on Friday as investors digested its latest set of earnings – and some decided that fast-rising revenue couldn't make up for disappointing profit 🚚💨

What does this mean?

Amazon enjoyed stellar first-quarter revenue growth across most segments – including an 8% jump at Whole Foods (which grew just 1% last year) and a 44% increase in digital ad cash. But Amazon’s profit was 20% lower than expected as shipping spending spiked 49% and coronavirus contingencies ramped up. Its CEO sat investors down for news that rising costs could see the firm make a loss this quarter for the first time since 2015.

Amazon may be gaining on Google and Facebook when it comes to online ads (Source: BBC)
Amazon may be gaining on Google and Facebook when it comes to online ads (Source: BBC)

Shareholders may also be looking beyond Amazon’s earnings. While its quarterly retail revenue rose more than forecast, the company’s share of the booming US ecommerce market has actually fallen 15% this year, according to recent data. That may still be five times higher than closest competitor Walmart – but Microsoft’s record cloud computing figures this week, combined with Amazon Web Services’ (AWS) slightly subpar revenue, suggests there’s also stiff competition in the profit-critical server farm sector 🤔

Why should I care?

Amazon is both more powerful and more vulnerable than ever – and its CEO richer. Regulatory and political pressure is rising: the US government late Thursday added five of Amazon’s overseas ecommerce platforms, including the UK’s, as “notorious markets” for counterfeit goods.

But the growing scrutiny is a function of Amazon’s growing revenue. Not only is its ecommerce operation doing more business than ever, but AWS’s ubiquity (see Netflix, Zoom, or Twitter) means it’s nearly impossible to be online without making Amazon money. And that positions it well for a socially distanced future.

Smart speaker domination supports unparalleled data-gathering capabilities (Source: BBC)
Smart speaker domination supports unparalleled data-gathering capabilities (Source: BBC)

Amazon’s size means it represents 4% of the entire US S&P 500 – and despite Friday’s fall, its share price rise in 2020 has helped the US stock market recover to enjoy its best month in more than 30 years. So is this dip a blip? Check out our Inside AmazonPack for an in-depth guide to forming your own view on the firm’s financials... 😉

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG