Amazon absolutely crushed it! The world’s biggest retailer made way more profit than investors were expecting – and yet the stock only jumped about 2%. It seems investors are getting used to the new Amazon: a company that actually makes money!
What does this mean?
For years, Amazon never made a profit. Every dollar it earned was ploughed back into investing in the business. The strategy changed a little over a year ago partly due to the huge success of its cloud business. Since then, Amazon has made a profit every quarter (five straight and counting) and investors have embraced the new strategy: the stock price has doubled in the past 15 months.
Why should I care?
For the stock: Why is Amazon making so much money? Some are asking whether all this profit means Amazon is running out of new ideas to invest in – although the company refutes that suggestion. Undoubtedly, investors are loving the profit-spewing behemoth that Amazon has become, but they’ll also want to see that Amazon can keep growing its revenue at a healthy clip. Investments in things like drone deliveries (it’s going to start testing that in the UK) should help. And its massive profits mean Amazon has plenty of ammunition to invest and keep some of the bacon in cash (or return it to shareholders).
The bigger picture: More big companies appear to be targeting growth in India rather than China. Amazon’s CEO, Jeff Bezos, made a point of highlighting their recent efforts in India, which includes launching Prime with unlimited free shipping and Prime video that will feature Indian content. International companies have recently found it more difficult to do business in China (Apple is one example) and the stats now suggest that India’s economy is growing faster than China’s. That combination means that plenty of international companies are shifting their focus to India.
Originally posted as part of the Finimize daily email.
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