Leadership Change at Amazon Is a Win
Jeff Bezos, chief executive at Amazon.com, Inc. (Nasdaq: AMZN), knows how to make money for shareholders. For almost three decades, his abilities have been unrivaled.
However, since September 2020, shares of the online retail giant have been stuck. The stock couldn’t get materially above $3,550 … but that was until Bezos officially stepped down from day-to-day leadership.
Shares closed at a new, all-time high recently around $3,773.08. For new investors, it looks like a great time to consider buying.
That might seem like a strange statement. Although shares have rocketed around 33,821% since 2001, the business might be even more exciting today than back then.
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Two decades ago, Bezos and his managers were trying to get consumers to change the way they bought products and services.
Amazon.com made e-commerce easy. It had exceptional customer service, incredible selection and fast delivery.
Today, in addition to expanding its retail reach, the business is becoming the computer system to the corporate world.
Amazon Web Services (AWS), its cloud-computing subsidiary, grew from excess capacity to run the online storefront into a $54 billion run rate behemoth.
AWS rents out computer processing and data storage to the world’s largest corporations for a handsome fee. This extremely profitable business segment is growing at 30% year over year as companies race to put more applications in the cloud.
That brings me back to Bezos and Amazon.com share prices.
The media likes to paint Bezos as a James Bond film villain. In fairness, it is easy to do. His net worth is $215 billion. He’s eccentric. He’s building a $550 million yacht and rocket ships for rich space tourists. (He’s also going to space later this month.)
Yet, all of his net worth is derived from doing the right thing for shareholders. And unlike most corporate leaders, he has not rushed to sell his stock. He kept it.
As his parting gift to shareholders, Bezos selected Andy Jassy as his successor. Jassy has been with Amazon since 2003, and he has been the leader at AWS since joining. Undoubtedly, those skills will translate well as he takes the helm.
Shares moved to a record high on Jassy’s first day last week, and I believe this is only the beginning.
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It’s normal for new CEOs to put their mark on the business early. It seems logical Jassy might strengthen the Prime services in media and logistics.
A stock split would be a great show of corporate confidence and would lift share prices immediately.
Shares are up around 21% in 2021 and trade at around 71 times forward earnings and 4.4 times sales.
Savvy investors should use any near-term weakness as a potential buying opportunity.
Jon D. Markman