In spite of the negative side effect caused by incoming president Donald Trump’s accusations against The Washington Post (which happens to be indirectly owned by Jeff Bezos who is Amazon’s CEO), the future of online retail giant Amazon (NASDAQ:AMZN) still seems to be looking up, not down.
Even if the company failed to meet its forecasted earnings, specifically in the third quarter of 2016, the reasons are actually justifiable. Their shipping costs rose. And they spent quite a lot on logistics, fulfillment centers, transport vehicles and product development. All these are investments, of course, with the end result expected to be big returns.
Competition is tough and getting tougher. But there’s a lot going for Amazon that will keep it ahead of everyone else it is competing against.
First, there’s no other way to say it: Amazon is at its prime. At the end of the holiday season, Amazon Prime’s membership soared to its highest level ever. Provided Amazon keeps up whatever it’s doing to drive Prime memberships up and hook Prime members into spending more, there’s no reason to think that the company’s growth cannot be sustained.
Second, online spending is continuing to increase. And if we use the holiday season sales figures as reference, it’s easy to see that Amazon is way up there. Based on a report by CNBC, Amazon got the highest share in online spending in the U.S., ahead of its rivals including Best Buy (NYSE:BBY), Macy’s (NYSE:M), Target (NYSE:TGT) and Walmart (NYSE:WMT).
Third, Amazon is relentless in its innovation efforts. It started with online selling, but it has now branched out to brick-and-mortar selling through Amazon Books and Amazon Go. And let’s not take for granted the fact that these are no ordinary stores. In particular, Amazon Go is one that does not have any checkout counters. It makes use of what they’re calling ‘Just Walk Out Technology’ because all customers have to do is walk in, grab what they want, and walk out. Everything they bring out will simply be charged to their Amazon account. This year, Amazon also has plans to open several pop-up stores in selected U.S. shopping malls.
Aside from expanding their sales channels, Amazon also has some pretty impressive products of its own. Do we even need to elaborate on Echo and Echo Dot which were certifiable blockbuster products last year?
And then there’s Amazon’s diverse delivery services. First there were trucks. And then there were drones. There’s also Amazon Flex — their Uber-like service. Self-driving trucks are coming too. With more delivery options comes faster delivery service. And with a better delivery service, it’s easier to keep customers constantly satisfied and always wanting to purchase more.
Fourth, Amazon has already built quite a reputation. Which is why online shoppers typically start their search with Amazon, before they widen their search to other retailers or make use of a search engine. A report by BloomReach (a marketing company) confirms this.
Lastly, there’s cloud computing. Through Amazon Web Services (AWS), the company has gained another segment of the market, mostly startups and those other companies who are in need of cloud computing services. As the world goes deeper into the digital age, the business of cloud computing has no way to go but up, up, up. Which promises even more revenue for Amazon. Not just this year, but probably much more in the next several years. And to add to the noise level, take a look at Amazon stock – currently trading around the $800 level – up 27 percent on a year-over-year basis, and the company’s fundamentals :
- $18.35 billion in cash in most recent quarter
- $67.71 billion trailing-12 total assets
- $13.38 billion total equity
- $128 billion trailing-12 revenue
- $596 million annual net income
- $7.33 billion free cash flow
- Profit, Operating Margin 1.64%, 3.16%, respectively.
If all these facts aren’t enough to discourage Amazon skeptics, we don’t know what will.