What should investors know about Amazon? What does Amazon want its investors to know? Regardless of the slight, yet very important difference between these two questions, people should be able to get a good look into the financials and expectations for Amazon as a brand, a company, and a body of shareholders. Transparency and insight like this allows traders to easily understand a company that looks at first glance like a tangled mess of a business. With so many different products for sale, sectors of their business including server hosting, Amazon Prime streaming and production, Fulfillment by Amazon and more, dissecting what makes the company a success and how it will fare in the future becomes a difficult task.
The first thing that most should know is just why Amazon has had such consistent success in the equity market. When a company is deemed successful and powerful, much like Apple, sentiment tends to shoot the stock price upwards. The only problem for these companies is that no matter how their perception, they still need to meet and exceed earnings expectations in order to keep steadily upwards. Amazon is a different story, and that leads us to point number one.
Amazon knows what is working for them…
1) Amazon uses market saturation and razor thin profits to control their industry. While it hasn’t been expressly stated by any Amazon management, these razor thin margins will not last forever. Surely Amazon is a household name by now and that means that even if they raise prices by a few cents each on a big list of the most popular products, their profits will increase on the scale of millions and millions of dollars. Investors should know that while the control and conquer method is not overtly friendly to consumers, it benefits shareholders immensely. Imagine, Amazon achieved stock prices past $500 per share based on the sentiment of its market control, and all of a sudden it raises prices slightly and has complete control over its ability to achieve expected earnings. It literally controls its own fate. And this is the reason that Amazon may be a rare example of a “tech” company whose P/E is actually reasonable.
The next point is something that management would like its investors to know: just what sectors of their business are the most successful. This is very important because investors want to know that Amazon knows what is working for them and what isn’t, and therefore what to invest more time into in order to keep making benchmarks.
Amazon Prime TV streaming
2) Amazon has a very broad business plan. Included in their goods and services are retail shopping (most recognize them for this), online advertising and marketing affiliation, books including the Kindle e-reader, Amazon Prime TV streaming and production, and web services including server hosting and cloud storage. Management over at Amazon wants investors to know where it will focus its efforts in the coming years. They have seen the most success and will pay closest attention to their Marketplace (online retail shopping), Prime (streaming of licensed television and movie assets, production of their own shows, exclusive retail memberships and shipping advantages) and AWS (a whole host of web services). This does not come as a surprise, as those three in order are probably what Amazon is most known for, respectively.
When Amazon is discussed among friends or investors, most of what is said revolves around the three business sectors mentioned above, but the one that isn’t usually as well-known is Amazon has a host of products that they manufacture to fit in with their other services. The final thing to keep in mind about Amazon, if you’re an investor, regards these products.
Kindle readers buy books through Amazon
3) Amazon brands their products with “hot” names like the Fire and the Kindle. If they create something else in the future (which they most definitely will), expect it to be called the “Flame” or something along those lines. Currently their Amazon Fire TV streaming device and stick, Fire Tablet and Kindle e-readers are selling very well. Each of these devices also succeeds at increasing the usage of other Amazon services. Kindle readers buy books through Amazon, and Fire TV users watch Prime more often than other available channels. Though Amazon sells similar products on their Marketplace from competitors, they also control the prices, and have stated that each of their products in these segments holds the #1 place. Amazon wants you to know that these product categories and attached services are driving continual growth, despite the fact that they aren’t in the top tier when it comes to earnings potential.
In order for more context on these figures and to better understand the whole picture for Amazon, it is suggested that readers dig into Amazon’s financials. With the information above, it may be easier to know what to look for and what has a bigger effect on the stock price of Amazon. Don’t expect it to go anywhere but up soon.