Negative press coverage has halted AMZN stock's rise even while the business keeps growing.
A proverbial $10,000 invested in Amazon.com last Christmas didn’t go anywhere. AMZN stock started 2021 at $3,218 a piece and now sits only about 1% higher. Meanwhile theNasdaq Composite index is up more than 14%.
Yet what’s true for the stock isn’t true for the company. For the first two quarters operating cash flow is up 16%, at scale. Sales continue to increase 35% a year, at scale. The AWS cloud now brings 30% of revenue to the net income line, while rivals like Alphabet lose money. International operations, long a money loser, are now profitable.
The stock market no longer values any of this. Amazon stock now sells for less than four times its annual revenue, and 52 times earnings. The go-go days are over.
What can bring them back? How about a little Christmas?
Christmas Come Early
Amazon haslaunched its Christmas sales before customers have bought their pumpkins. The site is doing“daily deals”on toys, electronics, cookware, makeup, and clothing, things people give each other in December.
The company’s recent “devices event” featured full-size TVs, Ring security items and wearables. These compete with products fromApple and Google.
What drew the media’s attention, however, was Astro, a $1,000 rolling version of its Echo screen. It’s a Ring doorbell and Alexa voice interface mounted on a Roomba. (Think“Rosie” from “The Jetsons”but without the sass.) The $20-a-month “Alexa Together” service surrounding the robot will help elderly people live at home longer. (This should be in every nursing home.)
Hating on Amazon
The negative coverage of Astro is just one example of how media attitudes have soured. Amazon is no longer the scrappy underdog. Now it’s “bigger than Walmart(NYSE:WMT)” —thus more dangerous.
Amazon’s plans for improving safetyraise privacy concerns. Its growing line of entertainment threatens to“take over Hollywood.”The head of the Federal Trade Commissionwants it broken up.
Critics call Amazon acounterfeiterand aunion buster. They say it’s a fence, aiding and abetting organized gangs.
Amazon is Infrastructure
The critics still miss what Amazon is.
Amazon is infrastructure. Amazon is capability. Amazon’s cloud increases business productivity. Amazon’s warehouses and trucks let you break bulk for less than stores can. Amazon entertainment, drawn from around the world, brings it closer together.
Former CEO Jeff Bezos estimated that replacing trips to stores with Amazon saves Prime members 75 hours per year. (It does.) The letter acknowledged problems with employee safety and compensation. Amazon’s starting pay is now$18/hour.
The fact that Amazon is now America’s retail infrastructure means it has new responsibilities. Itcan’t just fire workerswho complain. Everything it does is open to scrutiny.
When Amazon announced you can now send giftswithout knowing the recipient’s address,The Vergemade sure to add“no way to opt out” to the headline.
This is the new spin on Amazon — scary, dangerous, monopolistic. Its improvements to general productivity are being ignored, taken for granted.
The Bottom Line on AMZN Stock
Amazon’s enormous infrastructure of data centers, warehouses and delivery vehicles was bought with cash. Its long-term debt of $50 billion could be paid off with a single year of operating cash flow, $59.3 billion over the last 12 months.
Amazon is not a store. It’s not a movie house. It’s not a cloud. It’s all those things, but mainly it’s the cheapest way to do commerce of almost every type. CEO Andy Jassy could juice-up the stock price with a dividend or a stock split. As I’ve said, breaking up the companymight even increase shareholder value.
Amazon does what everyone else only talks about doing. Amazon is the secret sauce of American competitiveness. Yes, I still want a piece of that. Just don’t put all your eggs in that one basket.
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