Which Amazon Story Do You Want to Believe?

September 1, 2017
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Two Very Different Stories About Amazon
The best thing since credit cards or the next Sears?
Bloomberg, September 1, 2017

Moody’s Investor’s Service released a very interesting report on Amazon.com Inc. this week. It was distinctly different from the usual Wall Street research, which tends to be glowing about anything related to the company’s founder and chief executive officer, Jeff Bezos. I am a fan of his work and company, so in order to check myself, I seek out opposite perspectives when I can find them.

Indeed, anytime I see a report on a widely covered stock that is somewhat contrarian, it catches my attention. Of the 46 analysts who cover Amazon stock, there is one “sell,” five “holds” and the rest are “buy,” according to data compiled by Bloomberg. So when Moody’s Corp.’s research arrived with the title “The online giant is still a long distance from ruling retail,” I had to read it. This is just the sort of work that any Bezos fanboyneeds to digest to keep a balanced perspective.

My usual caveats apply: I am a big consumer of Amazon and its products — Prime, Alexa, Kindle and Amazon Video; I don’t own the stock, nor do my clients. Many of us might wish we did, although most of us wouldn’t have the stomach for its wild ups and downs.

Moody’s contrarian view is especially notable because it makes the intriguing argument that Amazon, while it may be an online juggernaut, is actually the weakest of the large U.S. retailers. Although the Seattle-based company does capture about half of all online retail sales, that’s a tiny share of all retail sales; about 90 percent of all sales are made offline.

It makes you think about why Amazon is so dominant online and whether it is deserved. There is a continuum of possibilities. At one end Amazon is the greatest thing to hit retail since the credit card; on the other, it is just another flash in the pan, a Sears of the future just waiting to competed away to near nothingness.

Where you fall on that spectrum is going to be a function of the narrative you tell yourself about the future . . .

Continues at: Two Very Different Stories About Amazon

Shareholder Letter 97 by Barry on Scribd

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