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Amazon's Bezos has kept the same message to Wall Street for 22 years



Amazon CEO Jeff Bezos Announces Blue Moon, a Moon Landing Vehicle for the Moon, during a Blue Origin event in Washington, May 9, 2019.

Saul Loeb | AFP | Getty Images

Jeff Bezos has undergone many changes since Amazon's stock exchange listing in 1997 – especially with appearance and wealth. But there is one thing that remained constant: his relentless focus on the future.

This approach, which Bezos spied in its first letter to investors 22 years ago, was made clear this week in Amazon's second quarter results report. Amazon beat Wall Street estimates of revenue, but missed out on profits, mostly due to increased spending across the board, a pattern that continues.

"The investment will step up in 201

9," said Finance Director at Amazon, Brian Olsavsky, during the revenue call on Thursday.

The shipping costs accelerated 36%, the highest for five quarters, to $ 8.1 billion, after the company spent more than the estimated $ 800 million to make a day's delivery standard for Prime members. In other words, Amazon cuts in profit margins today so it can send more things faster, and if the thesis works, even more consumers lure Prime.

Amazon shares fell close to 2% on Friday after the disappointing revenue number. But the stock is still up 29% this year, and Amazon is still the world's second most valuable listed company, behind Microsoft alone.

This is what Bezos wrote in his 1997 letter of shareholders – shortly after the company's stock exchange listing – which is included in each year's letter as a reminder of what's important:

"We will continue to make investment decisions in light of long – Long-term market management considerations rather than short-term profitability considerations or short-term responses to Wall Street, "wrote Bezos at the time.

Amazon founder and CEO Jeff Bezos in 1997

Paul Souders | Hulton Archive | Getty Images

It quickly became a familiar theme.

In 2000, during the dot-com crash, Bezos wrote that he "wanted to draw your attention to the section titled" It's All About the Long Term, "referring to the 1997 letter. The year after, when the market collapse lasted and Amazon incurred a huge loss, Bezos wrote, "If we do our job properly, today's customers will buy more tomorrow." And in 2012, after the company had recorded the biggest loss of over a decade , Bezos repeated his view and wrote, "Take a long-term view, and the customers and shareholders' interests match."

Amazon is a far different company today than 22 years ago, when the business was about selling books over the internet. Then it was about selling everything a consumer wants online, and along the way, Amazon was the pioneer of the cloud infrastructure market, built a large online advertising business and took the lead in voice assistants, and also started to generate actual earnings, produced record profits last year and gave the companyMuch more money to get into the core business.

"The key is that Amazon, as usual, invests in long-term growth opportunities," wrote Macquarie Capital's Ben Schachter, who recommends buying Amazon shares, in a note Friday. "Although it will lower margins, we believe the increased impact of the top line and, perhaps more importantly, the expansion of the competition burden is worth it."

& # 39; It's about long term & # 39;

During the second quarter, Amazon saw significant increases in two major spending categories: marketing and shipping. Marketing costs rose 48% to $ 4.3 billion, as Amazon spent more on marketing its products and hiring salespeople, primarily for its AWS cloud unit. Shipping costs were related to investments in the extension of a day's delivery.

In addition to reporting overwhelming revenue, Amazon's operating revenue guidance in the third quarter was well below estimates. However, sales growth fell back to 20% in the second quarter, after the growth in the previous period was the slowest in four years. Each major segment of its e-commerce business accelerated, including first-party online sales, which grew fastest in two years.

While investors remain cautious with the high spending, the reaction was largely subdued, giving the company a new continuation of its thin margins. None of the analysts tracked by FactSet felt compelled to lower the ranking after the announcement, and all 45 who have recommendations still call the stock a purchase.

"We wanted to be buyers of any weakness as long as top line trends remain intact," Evercores Lee Horowitz wrote in a note Friday.

SE: How Amazon Earned Record Profits in 2018


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