Can Amazon wake up from its 2021 nap? – The Average Joe

    Can Amazon wake up from its 2021 nap?

    Victor Lei — Head of Research

    January 12, 2022

    amazon

    January 12, 2022

    Investing in Amazon was a snooze in 2021 — its stock only up 2.3% on the year — way short of the S&P 500 average.

    It was also the worst-performing tech giant compared to Alphabet, Meta and Apple. But Amazon’s temporary weakness may be offset by its long-term potential.

    2021 just wasn’t Amazon’s year

    Amazon is many things — a successful cloud provider (AWS), streaming giant (Prime) and the fourth largest ad platform, on top of being an online retail behemoth — which brings in over 75% in sales, but also brought down its stock.

    In 2021, Amazon’s retail business was hit on all fronts:

    • Labor shortage led to increased employee wages.
    • Supply chain crisis led to higher freight and shipping costs and caused product shortages, impacting sales.

    And it was difficult for 2021 sales to top the turbocharged 2020 sales numbers from COVID.

    Amazon also underperformed compared to other e-commerce giants — Shopify, Ebay and Etsy — which had returns of over 20% in 2021.

    Retail, advertising, cloud and now logistics giant…

    To tackle its supply chain and hiring issues, Amazon plans to spend an additional $4B in the final quarter 2021 — erasing its earnings.

    But Amazon has long expected these issues — investing billions into its logistics network — $38B spent in 2019 and $61B in 2020:

    • Built a network of shipping hubs, delivery vans and an air fleet with over 75 planes.
    • Its investments could turn it into a competitor against FedEx and UPS — with 467 and 284 planes respectively.

    Amazon’s new CEO, Andy Jassy, has a lot to handle after Jeff Bezos’ departure in 2021 — adding more uncertainty to investing in Amazon.

    Investors: Fly to safety

    With markets expected to be rocky throughout 2022 — investors could benefit from holding strong stocks — Amazon being a top candidate.

    • Amazon has stood the test of many recessions — and its current pains could be temporary.
    • Guggenheim analyst expects Amazon to benefit from its supply chain investments in 2022 (via CNBC).

    Amazon ranks as a top pick among many banks, including Jefferies, Bank of America Global Research and RBC Capital Markets (Per CNBC).

    Watch: Amazon’s next quarterly report expected on Feb 1. expects 4-12% growth — down from 43% during its COVID peak.

    Receive stock market opportunities and news straight in your inbox

    Join 30,000+ investors and save 1,000+ hours on stock market research with our free newsletters.

    Recent Posts