Another strong quarter expected for Amazon amid the pandemic
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Amazon reports its second-quarter earnings Thursday after the market closes. The first quarter was a strong one for the e-commerce, streaming video and cloud-services tech behemoth. And Amazon’s business likely strengthened in the spring, with the COVID-19 pandemic shuttering a lot of brick-and-mortar businesses, and keeping a lot of people sheltering in place and ordering stuff from home.
Amazon is closing in on 40% of the U.S. e-commerce market. And with Americans hunkered down, Amazon’s interlocking internet businesses are firing on all cylinders, said equity analyst Tuna Amobi at CFRA Research.
“Streaming video, e-commerce, as well as cloud computing — learning and remote workforce — really helped Amazon tremendously to consolidate its gains,” Amobi said.
Amobi predicts strong revenue and profit growth — even though Amazon has burned through several billion dollars hiring new workers, beefing up employee PPE and testing for COVID-19.
But Amazon will face a challenge holding on to new customers, said Nick Shields, an analyst at Third Bridge. He pointed to the company’s grocery delivery business, Amazon Fresh.
“I’m curious to see if those are just one-time buyers, and they went back to buying their groceries the traditional way — just going to a brick-and-mortar store — or if these are longer-term Amazon Fresh customers,” Shields said.
Shields points out that Amazon does have giant, deep-pocketed, tech-savvy competitors for online shoppers, including Walmart.
Competition was also on the minds of legislators, when Amazon CEO Jeff Bezos and other tech execs testified before a congressional antitrust hearing Wednesday.
Dan Crane at the University of Michigan Law School said the issue boils down to whether consumers have real choices, or face a monopoly.
“When we ask who are Amazon’s competitors, if we’re just thinking of Amazon as a retailer, there are lots of those out there,” Crane said. “But when we think about Amazon as an e-commerce platform, there may not be that many out there that really can do what Amazon does today.”
One important question, according to Crane: How much control does the company exert over third-party sellers, who may have to please Amazon to stay in business?
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