Minuk's Musings and Amazon Story Time

A big week for Amazon.

For the 1^st time since 2021, the stock reached a new all time high.

 

 

Here’s the quick story of Amazon’s roller-coaster ride over the past 3 years.

 

2020 Pandemic:

 

You, and everyone you know, start buying EVERYTHING on Amazon instead of going in person to a physical store.

 

 

In an attempt to handle ballooning demand, Amazon hires between 500k and 1M people, doubling the size of their distribution network and building a truck fleet the size of FedEx and UPS.

 

 

2021 Going to Space

 

In 2021, Jeff Bezos (Amazon’s founder) steps down as CEO to focus on his space company Blue Origin. In his place, Andy Jassy was promoted to CEO.

 

 

Andy Jassy was often simply referred to as “The New Guy”, yet he was actually the mastermind behind Amazon’s AWS business which was by far the most profitable segment of Amazon.

 

 

Special note: Think of Amazon like 3 businesses in 1

Retail, Advertising and AWS (Amazon Web Services / cloud computing)

 

 

2022 Uh Oh! Coming Out of Covid

 

Timing for Andy arrival as CEO is unfortunate to say the least as Amazon grew too quickly during the pandemic and starts feeling the growing pains.

 

When the world re-opens coming out of Covid, Amazon finds itself in big trouble, hemorrhaging cash with their retail business largely unprofitable. Too many people, too many trucks, too much space, too many costs.

 

 

2023 – Cutting Costs and the Comeback

 

Pre-tax profit margins for the entire company begin the year at under 2% - basically flat.

 

With their retail business hurting, Amazon is being kept afloat by AWS (cloud) and advertising, which were still humming along.

 

CEO Andy Jassy begins focusing efforts on cutting. Cutting jobs and the size of the workforce, cutting side projects that were draining R&D funds, cutting anything that wasn’t adding profitability to Amazon’s core businesses.

 

By the end of 2023, pre-tax profit margins were back up to 8% and investors were cheering.

 

 

 

2024, More of the Same

 

Andy Jassy just released a letter to shareholders where he outlines the continued strategy of cost cutting, while remaining committed to Amazon’s Artificial Intelligence development.

 

Think about the amount of data Amazon has accumulated between their retail arm and AWS businesses. The adoption of AI is likely a big development in the Amazon story yet to be told.

 

You can read Andy’s letter here.

 

 

I hope you have a great weekend.

 

All the best,

 

Rich

Investment Advisor