IP Capital, a Brazil-based asset management firm, is bullish e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN). In its recently-released Q3 investor letter (you can download a copy), the investor discussed Amazon, saying that the number of new fronts opened by the online retailer over the last year is “truly astonishing.” According to the letter, Amazon, despite being a gigantic company, has ‘successfully’ started new businesses and ‘effectively’ developed new initiatives.
Here is everything that IP Capital said about Amazon in the letter:
In the 3Q16, we wrote a report on Amazon’s business model and on some of its opportunities in the coming years, such as Prime Now, AmazonGlobal, and the potential revenue from advertisements. A year later, the number of new fronts opened by the company is truly astonishing. Among them, the biggest acquisition in its history stands out: Whole Foods.
With regard to the acquisition, it is worth noting that the challenges are substantial, particularly concerning the cultural integration between both companies.
Whole Foods has nearly 90,000 employees (while Amazon has just over 380,000) and a very different culture from Amazon – skillfully documented in the book Conscious Capitalism, by John Mackey, cofounder of the company.
While Whole Foods’ culture values the sustainable balance between all stakeholders, Amazon’s culture is much more aggressive. At Amazon, contributors must pour blood, sweat and tears to please their most important stakeholder: the customer. Only time will tell if the new Whole Foods will be able to absorb the best of both worlds.
On the bright side, the acquisition will finally give Amazon firepower in perishable category. The AmazonFresh subscription program, targeting this category, has been around for ten years, but remains a niche service within the company’s consolidated figures. With a unique logistics system and supply chain, perishable products are handled independently from the other distribution centers of the group. For this reason, gains of scale earned in other categories are not shared with sales from perishable products.
Now, with Whole Foods’ 466 stores and 11 distribution centers, the scale, supply chain know-how and higher density delivery routes will be an additional strength to Amazon’s operations.
In addition to the acquisition, the insane pace at which the company innovates and tests new projects stands out. Despite being a gigantic company, Amazon has successfully entered new businesses and effectively developed new initiatives. The company’s entrepreneurial capacity has increasingly generated value to its customers and, as usual, tormented its competitors.
As usual, neither life nor investments are a bed of roses. Like Google and Facebook, Amazon’s supremacy is increasingly getting attention from governments and antitrust agencies. The ability to innovate and enhance its bundle of customer services and benefits continues to fuel the company’s rapid growth. Naturally, complaints from competitors – who cannot compete on equal terms – only increase, creating an additional challenge for the company before regulators. This is undoubtedly a risk, but one that we believe to be manageable. It is better to be on this side of the battle than on the competitors’ side.
Amazon.com, Inc. (NASDAQ:AMZN) is the popular stock among hedge funds and active investors. There are 133 hedge funds in Insider Monkey’s database with bullish positions in the e-commerce giant.
The online retailing giant reported impressive results for its fiscal-year third quarter. It had total revenues of $43.7 billion, versus $42.14 billion as expected by Thomson Reuters. Earnings per share was 52 cents, versus 3 cents per share as expected by Thomson Reuters. Meanwhile, Amazon Web Services revenue rose 42% to $4.10 billion.
Shares of Amazon.com, Inc. (NASDAQ:AMZN) are up around 55% this year. The stock has surged 57% over the last 12 months.
Don’t miss reading IP Capital’s comments on Wells Fargo, which is one the 10 most successful holding companies in the United States.