April 6, 2020
Amazon’s core ecommerce business has been slowing: CFRA Research analyst

Amazon’s core ecommerce business has been slowing: CFRA Research analyst


BUT AMAZON REPORTED LAST NIGHT POSTING A THIRD STRAIGHT RECORD PROFIT. HOWEVER, THE COMPANY’S REVENUE GUIDANCE FOR THE FIRST QUARTER MISSED EXPECTATIONS AND THAT IS WEIGHING ON THE STOCK THIS MORNING. WE’LL TAKE A LOOK AT AMAZON MOMENTARILY. AS YOU CAN SEE, THE NUMBERS THERE, $5.68 A SHARE VERSUS $6.04. THE STOCK DOWN RIGHT NOW 4.5%. JOINING ME RIGHT NOW, CFRA RESEARCH MEDIA AND ENTERTAINMENT AN ENTERTAINANALYST, YOUR REACTIONT ENTERTAINANALYST, YOUR REACTIONO ENTERTAINANALYST, YOUR REACTIONT ENTERTAINANALYST, YOUR REACTIONE AMAZON QUARTER.>>I THOUGHT THERE WERE A NUMBER OF POSITIVE TAKE-AWAYS HERE. THE OPERATING INCOME NUMBER ACTUALLY TOPPED THE GUIDANCE THAT THE COMPANY PROVIDED. THE ONE KIND OF BLIP IN THE QUARTER WAS REVENUE AS YOU ALLUDED TO. THAT IS ACTUALLY IN A WAY DUE TO THE LAW OF LARGE NUMBERS. IT’S FINALLY CATCHING UP. I THINK THE MAIN STORY HERE AS I THINK ABOUT AMAZON IS THE FAVORABLE MIX SHIFT FROM TRADITIONAL LOWER MARGIN BUSINESSES TO ACTUALLY BUSINESSES THAT ARE NOW GOING TO BE INCREMENTAL TO THE OVERALL MARGIN. THINK ABOUT CLOUD COMPUTING, THINK ABOUT THE SHIFT TO THIRD PARTY SELLERS AND ALSO THE GROWING ADVERTISING BUSINESS. ALL OF THIS I THINK BODES WELL FOR FUTURE PROFITABILITY. MARIA: WHAT DROVE THINGS IN THE QUARTER AND HOW WOULD YOU CHARACTERIZE THE HOLIDAY SEASON IN TERMS OF THE NUTS AND BOLTS OF THE BUSINESS, DELIVERY AND RETAIL?>>SURE. SO I THINK WE KNOW THAT THE HOLIDAY SEASON ACTUALLY CAME IN FAIRLY STRONG OVERALL ACROSS THE INDUSTRY. AMAZON HAS BEEN GAINING SHARE. ALL OF THE DATA POINTS THAT WE SAW COMING INTO THIS QUARTER FOR THE HOLIDAY SEASON I THINK REALLY SET THE COMPANY UP FOR WHAT I BELIEVE WAS A MONSTER HOLIDAY SEASON. ALL OF THE HARDWARE DEVICES, THE ECHO, ALEXA, THE FLASH STICK WERE FLYING OFF THE SHELVES. BUT THERE’S NO DOUBT THAT THE CORE E-COMMERCE BUSINESS HAS BEEN SLOWING AND WE SAW THAT AGAIN THIS PAST QUARTER. SO OVERALL I THINK THE FUNDAMENTALS OF THE BUSINESS REMAIN INTACT. THE FAVORITE METRIC THAT THE COMPANY LOOKS AT, TRAILING 12 MONTH OPERATING FREE CASH FLOW, NOW HITTING A RUN RATE OF ALMOST $20 BILLION, ALMOST DOUBLE YEAR OVER YEAR. MARIA: THAT SLOWING, IS THAT A FUNCTION OF THE SLOWING HE GLOBAL ECONOMY OR IS THAT A FUNCTION OF JUST AMAZON AND THE LAW OF LARGE NUMBERS AS YOU SAID? DOES GROWTH BECOME TOUGHER FROM HERE?>>IT DOES, FROM A TOP LINE PERSPECTIVE, THERE IS NO NO DOUBT. IF YOU’RE TALKING ABOUT THE CORE E-COMMERCE BUSINESS, BOTH IN THE U.S. AND INTERNATIONAL. BUT I THINK AMAZON WEB SERVICES, WHICH IS ONLY 10% OF THE OVERALL REVENUE GROWTH, IS GOING TO MAINTAIN A TRAJECTORY WE THINK OF AT LEAST 45% TO 50% GROWTH FOR THE NEXT FEW YEARS. NOW, ALMOST HITTING A $30 BILLION RUN RATE BUSINESS. SO THAT’S — MARIA: THAT’S THE CLOUD BUSINESS.>>THAT’S THE CLOUD BUSINESS. MARIA: AWS. OKAY. WHAT COMPANY SURPRISED YOU? TAKE A LOOK AT THE QUARTER IN GENERAL IN TERMS OF EARNINGS GROWTH. ANY COMPANY SURPRISE YOU SO FAR THIS EARNINGS SEASON?>>I THINK A LOT OF THE BIG MEDIA COMPANIES ARE YET TO REPORT. WE KNOW THAT FANG NAMES HAVE BEEN NAVIGATING A LOT OF THE PRIVATE ISSUES. FACEBOOKS WAS A REALLY GOOD POSITIVE SURPRISE, I THINK KIND OF SET THE TONE OF WHAT TO EXPECT HERE. SO I THINK THE CORE FANG STORY ESSENTIALLY REMAINS INTACT. THE MEDIA, THE CORE MEDIA BUSINESS AS WE LOOK TO NEXT FEW WEEKS WHEN THE BIG ONES START TO REPORT, FRANKLY I THINK THERE’S REALLY NOT MUCH TO BE TOO EXCITED ABOUT HERE. THE CORE BUSINESSES ARE FACING SOME SECULAR PRESSURES BUT ALL THE COMPANIES ARE REALLY REPOSITIONING THEMSELVES FOR THIS NEW PARADIGM SHIFT OF DIRECT TO CONSUMER SHIFT AND THAT’S GOING TO BE THE KEY HERE, WHICH COMPANIES CAN FAVORABLY MAKE THAT TRANSITION. MARIA: WE’RE COMING OFF OF THE BEST MONTH IN 30 YEARS IN THE MARKETS. WOULD YOU PUT NEW MONEY TO WORK HERE?>>IT’S DEBATEABLE, THE CHANCES OF RECESSION. THIS IS A SECTOR UNIVERSE THAT IS KIND OF CYCLICAL. IF THE ODDS OF A RECESSION INCREASE DRAMATICALLY, THEN ALL BETS ARE OFF. HAVING SAID THAT, I THINK THERE’S STILL FUNDAMENTAL THINGS THAT MAKE US OPTIMISTIC AS WE LOOK OVER THE NEXT 12 MONTHS. MARIA: WITHIN MEDIA?>>WITHIN MEDIA AND WITHIN THE

2 thoughts on “Amazon’s core ecommerce business has been slowing: CFRA Research analyst

  1. Bigger problems folks, invaders are loading into 100’s of semi trailers by the 1000’s heading to the US border, Mexican police and truckers are assisting them, and American politicians are sending more supplies, food, shelter, and doctors to the border further fueling even more migrants to come.

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