Around the announcement of the figures for the third quarter of 2021, one thing became clear: the long-term investor favorite Amazon is facing stronger headwinds.
The market reactions to the balance sheet were surprisingly negative.
Amazon is currently struggling with inflation. Especially with wage inflation. In times of Corona, more employees have to be hired and paid even better and they have to be lured with various bonuses - especially since Covid-19 and the lockdowns have caused an additional e-commerce boom. However, this gradually subsides. People are returning to their offices as well as the local shopping malls and supermarkets. In addition, global supply chain problems raise questions about how the goods ordered should get to customers on time. The latter question in particular is gaining in importance in the run-up to the important Christmas business.
Amazon has to react to this and hire even more employees, after all, customers will not accept excuses with global supply chain problems if the gifts for loved ones should not be under the Christmas tree until after the holidays.
CEO Andy Jassy summed it up when he said: "We have always said that when choosing between optimizing short-term profits or what is best for customers in the long term, we will choose the latter." Hence is being invested heavily.
In the short term in dealing with supply chain problems, in the long term, for example, in more capacities for one- and same-day deliveries.
(Too high expectations
Higher costs, a reopening of the economy and supply chain problems were some of the reasons why Amazon disappointed analysts' expectations with both its business results for the third quarter and its outlook for the current final quarter.
For the December quarter, the group now expects sales between 130 and 140 billion dollars, which would correspond to a year-on-year increase of 4 to 12 percent.
However, the FactSet consensus was previously 13.2 percent growth to $ 142.1 billion.
The reopening of many stores ensured that sales growth already declined significantly in the third quarter of 2021. Revenues climbed 15 percent to $ 110.8 billion. In the same period of the previous year the increase was 37 percent. In addition, the view of the fourth quarter was disappointing. The operating profit is seen at a maximum of 3.0 billion dollars, after 6.9 billion dollars in the same period last year. However, it is not as if Amazon did not present impressive growth figures before Corona. These should now only normalize a little.
In addition to the trading platform, it was above all the cloud area that had boosted company growth and improved profitability in recent years.
The revenues in the area of Amazon Web Services (AWS) grew in the third quarter by almost 39 percent to 16.1 billion dollars.
In this way, the group reached an important milestone.
For the first time ever in a three-month period, sales ($ 55.9 billion) achieved with the help of the service division (AWS, advertising, Prime memberships) exceeded trading revenues of $ 54.9 billion.
Impressive course development
According to the analysts at Bernstein, the return of people to their offices would actually favor the AWS sector, as this would allow companies to expand their cloud infrastructure more quickly. In addition, the headwind that is currently noticeable in many areas should decrease in the coming year from the analyst's point of view, the study continues. Therefore, the Amazon share remains a "top pick" for 2022 for Bernstein.
Anyone who takes a look at the long-term course of the chart is unlikely to get the idea that Amazon will not have enough potential in the future - if it is assumed at the same time that many of the current problems are temporary.
Over the next ten years, a 10,000 euro investment in Amazon shares has turned into more than 204,000 euros today.
Perhaps the pace of growth will not be quite as brisk anymore, but questioning a long-term investment because of one or two (somewhat) weaker quarters - very few are likely to do that.