Why Amazon And Retail Are 'Frenemies'

Tigress Financial’s Ivan Feinseth believes Amazon.com, Inc. AMZN holds a dominant position in the e-commerce segment, while its Web services and fulfillment continue to drive robust business performance.

Retail “Frenemies”

Feinseth mentioned that Amazon “continues to invest in fulfillment centers, cloud services, original content, hardware and global expansion as it focuses on creating long-term value over near-term profit.”

The analyst believes the company has continued to evolve into a global fulfillment and online infrastructure partner for the world.

Amazon’s robust brand equity and customer loyalty, along with its positive long-term results, are expected to continue to drive incremental economic profit and shareholder value, along with meaningful upside to the stock.

In fact, the Feinseth believes the company is “both a threat and a friend to all aspects of retail and fulfillment.”

Related Link: Amazon Gets New Buy Rating, $1,100 Price Target At Loop Capital

Robust Performance

The analyst reported that Amazon’s year-on-year revenue grew more than 27 percent, from $107 billion to $136 billion, driven by the company’s growing customer base and increasing customer penetration, especially through Amazon Prime membership.

Feinseth expects this trend to continue, with revenue rising 22 percent to $165 billion over the near term.

The company’s operating cash flow also increased 36 percent year-on-year, from $22 billion to $30 billion, primarily due to Amazon Web Services (AWS), which contributes a majority of Amazon’s operating profit.

The company’s operating profit is expected to grow 9 percent to $32.6 billion due to rising capex.

On the other hand, while net operating profit after tax increased 80 percent year-on-year, from $107 billion to $3.1 billion, the analyst expects a decline of 9 percent to $2.8 billion over the near term, due to rising capital investment, especially in fulfillment services and original content for Amazon Prime Video.