Jeff Has Always Reinvested Profits

Last week, Amazon reported quarterly earnings and told Wall Street it was investing the $4 billion second-quarter profit into PPE for employees and cleaning its facilities and developing in-house testing for COVID-19. So once again, Amazon decided to sacrifice short term gains for bigger rewards down the road.

But, investing any profits has always been the Amazon way. Check out this 1997 shareholder letter after the company went public which talks about shareholder value and market leadership through making constant, consistent and aggressive re- investments back into the company.

During the the dot-com crash, while Amazon and other companies were scrambling to stay alive, Amazon kept his eye on the prize and as quoted as saying, “if we do our jobs right, today’s customers will buy more tomorrow.”

And after constant losses because Amazon was reinvesting all their profits back into the business and in 2012 after the company suffered their biggest loss in over a decade, Jeff told Wall Street that the company was taking a long-term view with the interests of customers and shareholders in mind.

Lets fast forward to today.

J. Crew on Monday became the first national U.S. retailer to file for bankruptcy amid the coronavirus outbreak, and Neiman Marcus isn’t far behind, according to a Bloomberg report. Meanwhile, sales at e-commerce giant Amazon (AMZN) have surged while many Americans remain stuck at home.

Not only will more retail chains go out of business but also the sector as we know it will not survive, said billionaire fintech investor Glenn Hutchins in an episode of “Yahoo Finance Presents” on Monday.

“Physical retail was in the last stages of its decline,” he says. “Many of these retailers are going to be toppled over as a consequence of this crisis.”

Amazon, however, bucked the trend, as Yahoo Finance’s Heidi Chung reported, netting revenue of $75.5 billion for the first quarter of 2020, a leap of 26% over the same three-month period last year. The spike is likely attributable to the reliance on e-commerce as Americans order from home.

Source

The 45 analysts offering 12-month price forecasts for Amazon.com Inc have a median target of 2,700.00, with a high estimate of 3,000.00 and a low estimate of 1,840.00. The median estimate represents a +15.70% increase from current levels.

Credit Suisse analysts, led by Stephen Ju, lifted their target to $2,800 from $2,400.

Oppenheimer analysts, led by Jason Helfstein, boosted their target to $2,700 from $2,400.

JPMorgan raised its price target for Amazon to $3,000...joining Goldman Sachs and Susquehanna who already had $3000 as a price target.

Amazon was going to get there anyway, but what COVID-19 is doing is accelerating mass adoption of e-commerce. Specifically for Amazon, COVID-19 is accelerating customer acquisition, customer loyalty and customer ordering all household needs.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.