Date: 08/02/2021
Author: Mr. X
The headlines wrote themselves. Just days after his outer space triumph, Jeff Bezos lost $13.5 billion after Amazon [AMZN] plunged late last week. Given his wealth, one wonders if Bezos noticed. (He’s still the world’s richest person.) Clearly, his main focus right now is on space exploration and Blue Origin and he is no longer as heavily involved in running AMZN directly.
The catalyst for the sudden collapse was the company’s surprise miss on revenue forecasts. The likely explanation was that Americans were suddenly free to shop downtown again after COVID-19 restrictions were lifted. The company no longer benefitted from the massive influx in sales – but still had to deal with the costs of COVID, estimated at about $1 billion in the last quarter.
The company is also facing bigger problems. Amazon may no longer seem as popular as it once was. Amazon distribution centers, once objects of fierce competition between different localities, are now the subject of major political controversies. Progressives in Congress, notably Rep. Alexandria Ocasio-Cortez, have heavily criticized the company. Amazon remains a major target for union organizers and there are frequent complaints about its working conditions.
However, these critiques can be deceiving. According to a poll conducted in June of this year by The Harris Poll and the Center for American National Studies at Harvard, more than 70% of Americans viewed Amazon favorably. To put that in perspective, the only other institution that received a higher favorable rating than Amazon is the military. According to this poll at least, Amazon is more popular than the police.
Amazon does face political dangers. We saw some of this with the heavy criticism that Jeff Bezos received when he had his high-altitude adventure. Few noticed that afterward he gave a no-holds-barred donation of $100 million to CNN contributor Van Jones. Bezos also owns The Washington Post. In a public opinion battle, he may be able to call on powerful allies, even on the American left.
As for the American right, Amazon can count on the usual conservative reluctance to confront big business. There are some conservative complaints about censorship on Amazon, but these conflict with progressive demands for more restrictions on speech that could be considered hateful or offensive. Politically, they cancel each other out.
Even slowing online sales may not necessarily mean much. It’s important to remember that sales still grew 27% year over year, which is staggering. Perhaps even more importantly, Amazon Web Services was up 37% year over year. This part of the company may ultimately prove more important than even e-commerce – and new CEO Andy Jassy was the former head of AWS.
There’s also the question of COVID. The delta variant of the novel coronavirus is reportedly more contagious than the original strain. “Breakthrough” infections are hitting people who have been fully vaccinated. Recent data from Pfizer [PFE] showed that its vaccine’s effectiveness fades in less than a year, which is why the company is already pushing for a third “booster” shot.
At this point, Dr. Anthony Fauci says that he does not predict more lockdowns. However, with all due respect to Dr. Fauci, his predictions have not always borne out over the course of the pandemic. The social divide between the vaccinated and the unvaccinated population is becoming less a matter of personal, private choice and more a matter of public, political conviction. I expect disputes over “vaccine passes” and lockdowns to become a major issue in the 2022 midterms.
All this suggests that we might get another wave of COVID-19 infections. At the very least, we will get another wave of hysterical media coverage that could drive another wave of online shopping. We shouldn’t rule out lockdowns. We also shouldn’t rule out Amazon [AMZN] being the retailer of choice – or even necessity – of those who refuse to be vaccinated.
(Part of me even expects a fierce political battle about whether books about the supposed dangers of vaccination should be sold on Amazon.)
Amazon continues to grow its core businesses, is expanding web services, is developing an entertainment empire via Prime, remains broadly popular despite some powerful enemies, and didn’t unduly suffer from the retail reopening. Even that last short-term setback may be overrated as the delta variant (and resulting panic) spreads. Lockdowns, masks, sanitization, vaccines, and all the other issues many Americans thought we were past have come roaring back.
For that reason, Amazon’s best days may still be ahead of it, perhaps even in the very short term. Last week’s dip may simply be this week’s opportunity.
