Amazon is about to release earnings. Ponder the Bear Case Scenario.
Amazon relies on several delivery customers and is vulnerable to their infrastructure issues. Last Christmas FedEx and UPS took some bad press as they were overwhelmed in the last few days before Christmas. Amazon may need to spend serious capital on infrastructure to overcome the issues. They also need to keep the delivery agents competitive. If they max out capacity economics will take over and delivery costs will increase. We’re talking wide body cargo jets and expensive crews and jet fuel.
E-commerce in developing countries looks lucrative. But many of these economies are not westernized. Regulations may be oppressive. Local politicians corrupt and looking for ways to augment their personal retirement plans. This will get tricky for unassuming naïve Americans who are used to ignoring politicians.
Margin expansion has not been satisfactory. While revenues may generate large volumes shareholders are looking for bottom line to substantiate valuations. Eventually stocks are present values of future returns. Investors have been waiting.
George Gutowski writes from a caveat emptor perspective.