opportunities and headwinds ahead for Amazon.com – The Stute


Disclaimer: All views and opinions are those of the author and for educational purposes only. Please do your own research before assuming, investing or sharing. Financial information extracted from Bloomberg Intelligence and publicly available resources.

Photo courtesy of Roshni Revankar. Satirical texts between me and a peer that inspired this column.

If you were to Google “amazon” you would not get the world’s largest river, the Amazon River, but rather the world’s largest e-commerce company, Amazon.com. A company like Amazon has gone through quite the transformation over the past two decades, garnering a market capitalization of $1.6 trillion! From humble beginnings as an online bookstore to now focusing on cloud computing and artificial intelligence, Amazon appears to be the ever-growing giant. With the world as their oyster, Amazon’s possibilities for expansion are endless – it might be worth asking where, oh where, can Amazon go?

Capturing the online used car dealership market

Concerns about catching COVID-19 and its variants on public transport (we’ve all seen some things, right?) have led many people to purchase personal vehicles for errands and work dailies.

But with no end in sight to supply chain constraints and semiconductor supply shortages, prices for buying a new or used car have risen and consumers, for now, are willing to pay for it. The average price of a new car has increased by more than 20% in 2021 to around $47,000. Similarly, the average used car price in February was around $27,000 and is expected to rise further in March. Individuals are more likely to buy a used car for the most obvious reason being price, but also the feasibility of buying a used car online. With pressure on traditional dealerships to focus on new car margins, this presents opportunities for used car retailers like Carvana to expand further. With the pandemic gravitating us to an “online only” mentality, the growth prospects for companies like Carvana appear to be increasing.

Photo courtesy of Bloomberg Intelligence. All prices go up! AutoNation, one of the nation’s largest retail auto dealers, was able to see its profit margins increase by about 7.5%, while the used vehicle market saw its margins increase by about 7%. Since the two markets are close, profitability opportunities arise for both.

Carvana is the second-largest used-vehicle retailer behind Carmax, best known for its multi-storey car vending machines, and which may be venturing into a hybrid format with its recent $2.2 billion acquisition of Adesa. dollars. With Adesa under their belt, they could quadruple their retail revenue to $36 billion and possibly overtake Carmax. As consumers become more comfortable making larger purchases online, they could eventually increase their market share to 6%.

Photo courtesy of Bloomberg Intelligence. Here we see that Carvana is slowly progressing to the number of quarterly sales of Carmax, which can be reinforced with the acquisition of Adesa.

Carvana is not yet profitable, but a possible collaboration with Amazon could put Carvana at the forefront of the online used car market and develop Amazon further. With Amazon having already established itself in the hybrid model and Carvana venturing into the model, there is compatibility between the two companies which I think can be profitable.

Reclaiming Film Casting History

Last March, we saw the prominence of AMC stocks as Reddit traders forced a gamma squeeze on the classic college weekend date. The company has now fallen almost 74% since that peak and some people – me – have been confused with their recent stake in Hycroft Mining. But as recent box office figures for Batman and Spider-Man: No Coming Home show, the theaters are prosperouseven after a year of pure home streaming.

But, as you might have guessed, these recent successes overshadow real obstacles in the theater business. As in the case above with online purchases of vehicles, an $11 billion recovery in movie theater sales may not occur as studios find it more viable to send their mid-size movies to streaming platforms. streaming like Disney+ and Netflix. For the first time since the pandemic hit, Cinemark was profitable in the fourth quarter of 2020. Sales were approximately $666 million and cash from operations jumped to $208 million, bringing cash to 707 millions of dollars. However, all is not lost. Big-name Netflix and other competitors like Disney are struggling to add new subscribers in both developed and emerging consumer markets, and their massive earnings are shrinking.

Additionally, theatrical movie windows are now dropping from 90-95 days to 45 days, forcing streaming services to reconsider their plans. While this may shave nearly 6% off total annual movie theater revenue, the reality is that over 75% of box office revenue is made over three weekends – and some films generate 95% of revenue over the course of 45 first days.

For a company that is already enjoying relative success with its peers in the streaming space, Amazon may benefit from capturing the old movie distribution channel and be more successful in the hybrid model than its competitors. With competition only in theater or only in streaming, Amazon can capitalize on both market segments and increase its profitability. Additionally, Amazon recently struck a whopping $8.5 billion deal to acquire MGM Studios, pushing it further into the movie distribution arena – which makes me believe that vertical integration in the theater is not far from the sight of the e-commerce giant…

But alas, the world is not rosy: antitrust problems and obstacles to short-term growth

Obviously, vertical integration into the theater or car dealership business probably sends red flags – and we’re not the first to see its problems. Even though the FTC allows a 30-day review period and the European Commission found no conflict with the MGM acquisition, the House Judiciary said Amazon may be engaging in anti-competitive behavior. In their findings, they found numerous conflicting testimonies from former employees and current and former sellers that “Amazon gave preferential treatment to its own brands in its store’s search results, something [Amazon] also denied [in their side of reporting].” While the acquisition went through, it didn’t eclipse other Amazon tactics the FTC says could harm small businesses and consumers. Additionally, in its recent earnings report, Amazon said labor has become a major supply constraint for the giant, alongside inflationary pressures that could push its costs up to $4 billion. Growth has slowed and problems have increased for Amazon, from anti-trust to day-to-day operations, which may or may not self-regulate the e-commerce leviathan.

Not the Financial Times (NFT) is an opinion column created by Roshni Revankar ’22 to share ideas and research on students’ favorite companies, industry trends, and anything in the financial markets that really irritates their curiosity.


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