Amazon’s share price was moved by two large events last week.
Feb. 11, 2021
This article was originally published on Opto – Understand What Really Moves Markets.
The first was a blockbuster earnings result, with sales jumping 44% to $125.6bn in the fourth quarter, compared with $87.4bn in the same period last year.
The second was Jeff Bezos’ announcement that he would vacate the CEO position to make way for Andy Jassy, who currently runs Amazon’s incredibly profitable cloud computing division, AWS.
Bezos, who founded Amazon 27 years ago, will take up the position of executive chair, a move he hopes will free up more time to devote to his other projects — notably space tourism business Blue Origin.
So, what could the future look like for Bezos and Amazon’s share price?
Amazon’s share price and Bezos’ departure
Amazon’s share price closed over 40% higher last week, with investors seemingly unfazed by the announcement of Bezos’ role change. Bezos will remain in his post until the third quarter, but investors will be comforted to see that the company is now much more than one man.
In an email sent to Amazon employees and posted on its website, Bezos wrote:
“As Exec Chair I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions. I’ve never had more energy, and this isn’t about retiring. I’m super passionate about the impact I think these organizations can have.”
Bezos is stepping aside on a high, but can he bring the same level of success to the rocket building business?
What you should know about Blue Origin
Where fellow billionaire Elon Musk has SpaceX, Bezos has Blue Origin. Owned by Bezos but run by CEO Bob Smith, Blue Origin was founded in 2000 with the goal of making reusable launch systems for space exploration. Bezos is reported to spend circa $1bn annually on Blue Origin.
There’s plenty for Bezos to get his teeth into. In December, NASA gave Blue Origin the thumbs up to use the New Glenn rocket for planetary missions and satellite launches. Before that, it won $1bn in funding from NASA to design a human-landing system for the space agency’s plan to return humans to the moon by 2024.
What makes Blue Origin different from Amazon — aside from the fact it’s building rockets — is the stiff competition it faces, not only from SpaceX, but also from more established rocket builders like Lockheed Martin [LMT].
Whatever happens, space could form a big part of Bezos’ future. The New York Times quotes Rob Meyerson, who was president of Blue Origin from 2003 to 2017, as saying “If Jeff [Bezos] chose to spend more time at Blue Origin during the next phase of his career, that would be a very good thing for Blue [Origin].”
Blue Origin is not a publicly listed company, however, there is investor appetite for this type of future technology. Virgin Galactic’s [SPCE] share price has skyrocketed over 425% since it launched via a SPAC in late 2019 (as of 8 February’s close). When it launched, the space tourism company was valued at $1bn and today it’s valued at over $13bn by market cap.
Philanthropy will likely continue to factor in Bezos’ future, notably through his $10bn Earth Fund, focused on fighting climate change. As The Verge points out, the first beneficiaries from the fund have been advocacy groups. This sets it aside from Amazon, which is focusing on technological solutions to fight climate change, with plans to have a fleet of 100,000 electric delivery vehicles on the roads by 2030.
Amazon’s incoming CEO Jassy may be glad that Bezos is on hand as executive chair when he takes over the hot seat later this year. The Amazon veteran of 24 years faces a thicket of issues when he takes charge.
According to Bezos’ own The Washington Post, the pile of potential problems includes possible governmental investigations into antitrust, workers’ rights and environmental policies. Regulation — both domestic and global — is likely to be a major sticking point in 2021, not only for Amazon, but for other big tech giants including Alphabet [GOOGL] and Facebook [FB] too.
Among the analysts tracking the stock on Yahoo Finance, Amazon’s share price has an average $3,992.57 target. Hitting this would see a 20.15% upside on the current price (as of 8 February).
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