Online retailer and e-commerce company Amazon (NASDAQ:AMZN) has a new chief executive officer in Andy Jassy and the new leadership appears to have been the spark needed to push the company’s stock higher after months of stagnation.
AMZN stock is up 6% in July as longtime CEO Jeff Bezos transitioned to the role of executive chairman and Jassy assumed responsibility for the Seattle-based company’s daily operations. The increase in Amazon’s share price over the last three weeks accounts for a full 50% of its growth so far in 2021. The stock was flat from October through the end of May, unable to stay above $3,200 a share.
With Jassy at the helm, Amazon’s stock has finally broken out and is now trading close to $3,650, giving hope to investors who have held on over the past nine months.
New Leadership
While markets seem to have welcomed the change in leadership at Amazon, it isn’t immediately clear where Jassy plans to take the world’s largest online retailer. A giant company that controls 50% of the U.S. e-commerce market and earns more than $100 billion each quarter, Amazon has thrived and only grown stronger during the Covid-19 pandemic. Consumers all over the world were forced to shop online from home as brick-and-mortar stores were shuttered under health guidelines.
While Amazon remains a strong going concern with market dominance and plenty of upside potential, the new chief executive inherits a fair number of problems facing the company. Chief among them are antitrust actions being taken against Amazon and other big tech firms in Washington, where lawmakers seem intent on reigning in the growing power of dominant tech players. It is unclear if Jassy has the political acumen to manage the issues arising on Capitol Hill.
Prior to assuming the top job at Amazon, Jassy, a graduate of Harvard University’s Business School, was focused on creating Amazon’s large and very successful cloud computing business, Amazon Web Services (AWS).
Antitrust Actions
Half a dozen bills now before Congress threaten to disrupt or even dismantle Amazon and other major technology companies. President Joe Biden has appointed as the new head of the U.S. Federal Trade Commission prominent Amazon critic Lina Khan, who wrote her college thesis alleging anti-competitive practices by the company. The FTC is actively investigating Amazon’s $8.45 billion bid for movie studio MGM.
Outside of Washington, Amazon faces several anticompetitive investigations from state attorneys general focused on its pricing strategies and use of consumer data. In Europe, Amazon is currently the subject of two anti-competitive investigations, looking into the company’s dual role as a merchant and owner of Amazon.com.
These multiple antitrust actions threaten to occupy a considerable amount of Jassy’s time early on in his tenure at the top of Amazon. Some pundits and analysts have commented that Bezos appears to have timed his exit from the company well given all the political pressure being exerted right now.
Core Strength
Political headwinds aside, Amazon’s core business remains very strong. The company’s sales rose 44% year-over-year in this year’s first quarter, and the company has posted two consecutive quarters of revenue that exceeded $100 million. Management has forecast that sales for the second quarter, which includes Amazon’s annual Prime Day online sales event, will increase between 24% and 30%. And, Amazon has a history of beating its own guidance.
Additionally, Amazon continues to expand into new areas, from cloud computing with AWS to the streaming of movies and TV shows through Amazon Prime and grocery retailing with Whole Foods. All of the company’s various business segments are thriving.
Amazon Web Services, in particular, is doing extremely well and now accounts for much of the company’s profit. Operating income at AWS increased 37% in the first quarter from a year earlier to $3.56 billion. Today, just over half (52%) of Amazon’s operating income comes from AWS, the division that Jassy previously led.
Buy AMZN Stock
There’s never a bad time to buy Amazon stock. But now, with a new chief executive installed, a booming economy, and strong consumer and business spending, it appears to be an optimal time to add AMZN stock to a portfolio or buy more shares if already owned.
Analysts seem to agree that now is a good time to buy Amazon stock. The median price target on the shares is 4,224.95, suggesting a further 18% gain from current levels. There are 49 “buy” ratings on the stock and no “sell” ratings.
While political forces might be conspiring against Amazon right now, the company is not alone in facing antitrust scrutiny. All the major U.S. tech companies are under the same microscope in Washington.
The political clouds shouldn’t obscure the fact that Amazon remains a great company and AMZN stock is a definite buy for any investor.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
