Amazon has challenges ahead

Competitors, consumers and regulators are changing the trillion-dollar ecosystem

Andrew Willis 21 May, 2020 | 1:31AM
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Andrew Willis: Amazon (AMZN)’s been somewhat of a beacon of hope in the pandemic, as it was ahead of a historical shift to online-only retail. At its worst, the price of the stock wasn’t far from December levels, and at its best – well, that’s around right now.

The stock has soared since its recent earnings miss, even after announcing that costs from the coronavirus could eat up as much as 4 billion U.S. dollars, or about a quarter’s worth of profits. It’s clear investors have moved on from the short term pain, but are they appreciating the new long term risks?

Sector analyst R. J. Hottovy says that while wide-moat Amazon enjoys a good lead on a massive online consumer trend, there are a wave of risks, including new competition and coronavirus-related changes in consumer behaviour – and budgets - that will have a lasting impact on the industry.

And let’s not forget the regulatory risks. Amazon’s been in the spotlight with the U.S. Justice Department around antitrust concerns and there’s a growing threat of increased shipping fees in the U.S.! It’s also hard to fully appreciate intangible issues, like data breaches, data usage and privacy.

Investors looking to get in on the Amazon ‘way of life’ are betting the business is wide enough to withstand – and potentially define – the next consumer generation.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating Inc184.70 USD0.58Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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