Amazon (AMZN) missed earnings estimates in the third quarter and is expecting more pain in the near term, which one analyst says are a sign that the company is spending now to set itself up for more upside later on.
“The most important investment that they’re making is in wages,” Anthony Chukumba, an analyst at Loop Capital, told Yahoo Finance Live (video above). Even after increasing workers’ starting compensation from $15 an hour to over $18 an hour, adding benefits, and creating $3,000 signing bonuses, “they’re still struggling,” he added.
“We’re seeing all the same stories … from so many different companies — it’s becoming increasingly difficult to hire unskilled workers as well as to retain them,” Chukumba explained. “You need to have these people in the warehouse, you need to have them on the trucks. Otherwise, the whole system just breaks down, quite frankly.”
Chukumba has a Buy rating and a $3,775 price target on Amazon. Shares of Amazon closed at $3,372.41 on Friday and are up 5.83% so far this year.
‘It’ll be expensive for us in the short term’: Amazon
Amazon posted third-quarter results and guidance that left Wall Street balking as the e-commerce giant forecasted billions of dollars in additional costs heading into the holiday shopping season.
“In the fourth quarter, we expect to incur several billion dollars of additional costs in our Consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs — all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season,” Amazon CEO Andy Jassy said in the company’s earnings release. “It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”
“We expect… strained supply chains to last until the early parts of 2023,” Peter Sand, chief shipping analyst at Copenhagen-based BIMCO, a shipping trade group, told Yahoo Finance in a previous interview. “We are basically seeing a global all-but-breakdown of the supply chains from end to end.”
The losses reported by Amazon on Friday were an acknowledgment by Amazon that “we have to pay our employees more. We have to give them the sign-on bonuses,” Chukumba said. “We’re seeing this sort of inefficiency in our supply chain and we’re going to eat it. We’re not going to pass that along to our customers. We’re not going to pass that along to our… sellers. We’re going to going to eat that.”
And ahead of the holiday season, choosing to stomach higher costs rather than raise prices is “quite frankly… the right decision,” he added.
Andy Jassy, CEO Amazon Web Services, speaks at the WSJD Live conference in Laguna Beach, California, U.S., October 25, 2016. REUTERS/Mike Blake
Amazon could raise Prime cost, prices in longer term
Longer-term, there are many options the company could take to recover many of these losses.
“It’s been over three years since they increased the price of Amazon Prime, it’s now $118 a month. I really think that they could increase that,” Chukumba explained. “I don’t think the vast majority of Prime subscribers would blink at that.”
Another one of Amazon’s options would be to “increase their rates that they charge the third-party sellers and they could even increase prices on first party,” Chukumba said. “And by the way, we’re hearing from a lot of companies that, you know, consumers are not blinking at price increases.”
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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
