The company’s stock price changes with 9% in sessions following similar earnings releases
The online retail giant is expanding its business in multiple directions and traders will be waiting to see how this will reflect on company shares today after they provide their numbers to shareholders and the public.
Starting from books and growing to be an online retailing giant with products covering almost all segments, Amazon still continue to look for opportunities to branch out into new businesses and maintain growth. Led by Jeff Bezos, the company dealt with competition from Best Buy, Sears and J.C. Penney in the first years of its existence and now goes toe to toe with Walmart, Apple and Netflix.
The frugal style of the company and its low margins have transformed the publishing business and reading as a whole through Kindle. Nowadays it’s a common phrase to “look on Amazon” for a product, placing it in the frame where only brick and mortar shops stood, with eBay covering the online sector. With so many directions being pursued, it’s understandable that they are spending on infrastructure – 15 additional sorting centres in the US and rolling out same day delivery service across more and more locations, as well as experimenting with drones for delivery.
The last earnings report came in the end of July when they unveiled some disappointing results, but also started sales of their Fire smartphone. It hasn’t been the success they expected and shares fell 10% since the announcement, but have managed to claw back to over $300 per share (their current price is $313.01).
As is the usual case with Amazon, it will be a story of revenue versus profits. The direction for the former has always been up and expectations are that it will now reach around $21 billion, 22% up on last year’s number. Most investors seem content with only this being the driver of the company’s financial performance, but there are some grumblings that profits, both for the company and for shareholders, seem to be moving further away.
Growth in revenue is important, but its margins that are the focus of these shareholders and investors. Amazon is attempting to address their concerns with food delivery, seen as a business that can provide the “two birds with one stone” inspiration. The segment is viewed as large enough to accommodate new players and is ripe for disruption with over $1 billion in value in the US market. Its promise is confirmed by Google’s recent entry in the market with their own service.
Amazon has generally been a win for anyone who invested in them since their IPO back in 1997. Although the current situation is far from perfect – the last nine months have seen shares drop 25% from their all-time high in the beginning of the year – this is still a company in a high-growth business that is definitely changing our lives.