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REUTERS: Investors’ inclination to prioritize profit expansion in Amazon.com Inc. will be tested Thursday as investors absorb the effect of pandemic prices in the current quarter that may exceed $4 billion.
The world’s largest online store, a rare and high-growth investment thanks to its lucrative cloud computing business, can gain a percentage of the market as tired shoppers of viruses replace their online shopping and business closures hit in-store stores.
Still, some analysts ask if Amazon inventory can continue to increase from its current level of $3,000.
Stocks have risen 25% since April 30, when Amazon warned that spending on COVID-19 testing and other security and personnel measures could outperform the expansion of profits this quarter. At the time, the Company forecast a quarterly operating profit source of less than $1.5 billion to more than US$1.5 billion. Amazon reported an operating source of $3.1 billion in last year’s quarter.
“We recognize that there is a peak level of uncertainty due to the pandemic, and a superior threat that (Amazon) does not achieve operating results,” Jefferies analysts said in a note. Amazon has consistently exceeded Wall Street’s quarterly operating profit estimates by about 50%, analysts said.
Amazon remains the must-see for online shoppers, but demanding situations are multiplying. New coronavirus infections are sweeping the United States, a market that accounts for about 70% of its retail business, and a weekly payment of $600 for pandemic unemployment could simply expire and reduce customer spending.
Amazon has increased its investments following the increase in online grocery purchases driven by pandemic disruptions ranging from unavailable products to long waiting times, sending buyers into the arms of rivals Walmart Inc and Target Corp.
When Jefferies surveyed more than 500 consumers by the end of April, 69% of respondents said they were experiencing delays or disruptions with inventory outages on Amazon. Of these, 62% said they were buying more from other online sellers, basically Walmart and Target. And 28% of shoppers who increased their purchases elsewhere said they planned to continue doing so once the fitness crisis was over.
Betting against Amazon has been tricky in the past, said RJ Hottovy, Morningstar’s customer analyst. “We believe that the market has once again had a ‘growth rather than profitability’ mindset,” he said.
Meanwhile, Walmart is launching a rival to Amazon’s Prime subscription at $119 consistent with the year, which includes loose shipments.
(Report through Lisa Baertlein and Akanksha Rana; edited through Grant McCool)