It seems like nothing is going right for Amazon. This Thursday, the company reported losses of $0.95 per share, revenues came in at $260 million less than analysts’ estimates, and more losses are projected for the fourth quarter. This recent loss brings Amazon’s year-to-date performance to -30% for investors.
From the start, Amazon has prided itself on growing at an extremely fast pace, investing heavily and postponing profits. However, analysts have begun questioning this strategy, leading to a 10.7% loss on the stock and a decrease of $15 billion in company valuation. Amazon’s emphasis on growth is what investors see to be a huge problem. As an American retailer expanding overseas, Amazon is faced with competition from established companies in those regions. For example, Amazon’s biggest area of growth is in China, where markets are already in favor of incumbent company, Alibaba. Although Amazon is growing at a swift 25% in the United States but only 14% abroad.
Another problem with Amazon’s strategy is that it cannot compete with Apple and Google, in regards to hardware and software. Amazon has not had much resistance from demolishing Target and Barnes and Noble; however, doing battle with the “big dogs” puts Amazon in a whole new ballpark, where it must continually innovate or it will lag behind in the hardware competition.
Even with Amazon’s recent struggles and an ominous future, the company still has many bright points. Amazon’s Kindle was enhanced this quarter earning excellent reviews, Amazon’s original TV show, “Transparent”, received positive feedback, and the company just bought Twitch, a popular streaming site, to strengthen its gaming sector.
If Amazon wants to beat analyst projections and give investors a higher return, it must alter its strategy domestically and abroad; because the company is facing stiff competition from Google and Apple, its products must be redesigned and software has to be innovated. No longer can Amazon be content winning against struggling companies like the late Borders. I believe Amazon must curb its spending and justify it to investors or else the stock price will continue to fall and losses will accumulate.
-- Jonathan Wang