Despite the fact that Amazon stock is a great investment, it is important to keep up with the changes that are happening in the company. This can be done by looking at the company’s financial results and growth catalysts.
Amazon's growth catalysts
During the last 12 months, Amazon has made some great strategic bets. They’ve made it a priority to build a sustainable business, and have made other corporate bets as well. They’re aiming to integrate their online and offline capabilities to provide the best possible shopping experience for customers.
They’ve been successful, and the company continues to show impressive growth. They’re also investing in small businesses, and have even taken a big step forward with their climate pledge. They also recently launched a $2 billion Climate Pledge Fund.
They have a lot of smart things going on, including a ‘Just Walk Out’ store that uses artificial intelligence to reduce checkout lines. This could be a huge catalyst this year.
They’ve also introduced new features into their cloud computing platform, Amazon Web Services. This will help them grow their margins even more. They’ve also launched a new $1 billion industrial innovation fund. Amazon will give the first companies in this fund a boost.
Another good sign is the fact that Amazon’s costs have fallen substantially in both input costs and shipping rates. It’s also one of the cheapest companies to run, and they’ve got some big wins under their belt.
The company has also made some great investments, such as their venture capital fund, which invests in venture studios and pre-seed stage venture capital funding for underrepresented founders. This will help them unlock economic growth for underserved communities.
They’ve also invested in infrastructure, and the company has been investing in transportation facilities as well. This could help reduce their cash burn and help them get their products to customers more quickly. This should also help the company’s e-commerce growth. They also recently acquired Whole Foods, and they’re hoping to make food shopping more convenient for customers.
As the holiday season approaches, it looks like Amazon will be able to make some serious progress in their retail business. They’re investing in more fulfillment centers, and they’re hoping to roll out more grocery stores next year. With more consumers spending more online, they could be able to turn their losses around.
Amazon's recent investment in EV manufacturer Rivian
Earlier this year, Rivian, an electric vehicle manufacturer, filed for an initial public offering. Amazon was one of the major shareholders of the company, which went public at the end of November. Amazon’s investment in Rivian represents the biggest dollar investment the company has ever made in another company.
Rivian plans to build an all-electric vehicle plant in Normal, Illinois. The company plans to launch four vehicles between 2020 and 2025. The first is an electric pickup truck. Rivian also plans to launch an all-electric SUV and a long-range electric vehicle. The company also plans to manufacture prototypes for these vehicles. Rivian’s stock price has been volatile. This is largely due to production delays and supply chain constraints. Rivian is not yet profitable, and the company expects to make a loss in each quarter of the year.
Rivian has an agreement with Amazon to deliver 100,000 electric delivery vehicles over the next 10 years. Rivian has a huge war chest of cash on hand, and it’s expected to make more than $10 billion in sales in 2022. However, Rivian’s stock has a price to enterprise value ratio of less than eight, which is considered to be relatively cheap. This makes it a good investment for investors.
Rivian has a large backlog of preorders for its R1 and R1T electric pickup trucks. These vehicles have received praise from critics and consumers alike. In fact, Rivian’s R1T pickup truck was named Motor Trend’s Truck of the Year for 2022. Rivian has also signed a memorandum of understanding with Mercedes. Rivian has already logged more than 90,000 preorders for its R1 and R1T pickup trucks. Rivian has also received strong early preorders for its long-range electric SUV, the R1S. In total, Rivian expects to produce over 25,000 electric vehicles in 2022.
Rivian’s stock price could climb even more if the deliveries go according to plan. Rivian isn’t yet profitable, but with the support of Amazon, Rivian will be able to grow its business and raise funds to support its growth.
Rivian and Amazon are working together to develop electric delivery vehicles, and Amazon has plans to build thousands of electric vans in more than 100 cities by the end of the year. Amazon is well known for making big bets on growth companies. The company’s investment strategy in Rivian is well thought out.
Amazon's plan to decrease overall warehouse space
During the height of the COVID-19 pandemic, Amazon built an unprecedented amount of warehouse space. But now, with a sluggish economy and a slowing online shopping season, the company is shedding excess warehouse space. It’s also renegotiating its leases and possibly ending them early.
The company is planning to shed 10 million square feet of warehouse space nationally. That’s less than one-fourth of its total square footage. And it represents just a small percentage of the space it had leased in the last two years. It’s no secret that Amazon has overcrowded its facilities, which has led to a drop in efficiency and a massive cost overrun. But the company is a little cautious about letting go of its excess capacity.
Amazon is shedding at least 10 million square feet of space nationwide, but it isn’t sure how much of it to shed. The company estimates that excess space will add $10 billion in costs in the first half of 2022. But the company doesn’t plan to lay off employees because of the space reductions. It is instead planning to sublease the space to other companies. It has also canceled shelving plans for more than a dozen fulfillment centers.
Amazon isn’t going to give specifics on which warehouses will be repurposed. But the company is shedding old, traditional mid-market warehouses, as well as expanding into newer, better facilities.
Amazon’s warehouses are huge. At the end of 2019, the company had 192 million square feet of warehouse space. It opened a new facility in Carteret in 2017 and a second one in Robbinsville in 2018. In fact, the company’s warehouses are some of the largest in the country. Its Robbinsville facility is the equivalent of about 20 football fields in size.
Amazon is also planning to open new warehouses in South Jersey, which has been one of the nation’s hottest industrial markets for several years. The company has more than 10 million square feet of space under construction in the area. The company recently subleased a 300,000 square-foot industrial facility in the East Bay to Dependable Highway Expres.
Amazon's financial results
Despite a slowdown in online consumer purchasing and inflationary pressures, Amazon delivered a second-quarter financial results that exceeded expectations. The company’s net sales increased by 22 percent from the previous quarter and by 13 percent from a year ago.
Amazon’s financial results also showed a sharp decline in free cash flow. The company’s cash flow, which is the money that comes in and out of the company, decreased by more than 30 percent from $46.3 billion in the trailing 12 months to $39.3 billion in the quarter. In addition to free cash flow, Amazon’s cash flow includes sales and maturities of marketable securities. This includes cash that Amazon acquires as a result of acquisitions, as well as proceeds from property and equipment incentives.
The company’s revenue increased by 17 percent in the quarter, with its international segment seeing a growth of 12%. Amazon’s web services segment, which remained a cash cow, showed a 32% increase. Despite the significant growth of AWS, the company’s operating loss remained a bit lower than expected.
The company’s operating expenses rose by 12% from the previous quarter, due to increased shipping, fulfillment, and transportation costs. These expenses are related to the fulfillment process, including picking products, storing them, and delivering them. During the quarter, Amazon also opened 12 new fulfillment centers. Amazon’s operating loss was primarily due to fulfillment network inefficiencies. The company also acknowledged inflation-induced cost pressures. It also incurred liabilities for accrued expenses. Amazon also had to cover the costs of Covid-19, a medical software program that was disrupted during the quarter.
Amazon’s advertising revenue increased by 25 percent, surpassing analysts’ estimates of $9.48 billion. During the quarter, Amazon’s advertising sales exceeded 15 million viewers for the NFL Thursday Night Football kickoff, and 25 million viewers for the Lord of the Rings: The Rings of Power premiere.
The company also announced 55 million Amazon Music subscribers. Amazon’s cloud computing business, which has been the company’s growth engine for many years, posted a net sales increase of $13.5 billion in the quarter. The company also closed down a number of experimental projects.