Tag: Amazon

Amazon is pushing deeper into business-to-business e-commerce, which one analyst estimates could add $18-billion in company revenue by 2020.

The B2B unit, Amazon Business, began as Amazon Supply in 2012. The initiative was rebranded in April 2015 and Amazon — which posted 2015 revenue of $107-billion — recently indicated it reached more than $1-billion in annual sales, with 300 000 customers.

Bank of America Merrill Lynch analyst Justin Post estimates Amazon Business will reach gross merchandise volume of $3,5-billion this year, resulting in revenue of $3-billion.

He anticipates GMV of $8-billion next year and revenue of $6,4-billion. By 2020, estimates Post, Amazon will hit GMV of $25-billion and $18,6-billion in revenue.

“Based on recent management comments, Amazon Business appears to be ready for prime time, and we wouldn’t be surprised if Amazon invests in marketing to raise awareness as Amazon’s procurement systems improve,” said Post in a research note.

According to market research firm Frost & Sullivan, the US B2B market is expected to reach $1-trillion in sales by 2020, and $6,7-trillion globally.

“We think B2B provides significant runway for growth, which could help Amazon sustain its growth rates and premium valuation for many years,” wrote Post.

He has a buy rating on Amazon stock, and a price target of 840.

Amazon stock ended trading up more than 1%, to 704.20, in the stock market today, after touching a record high above 722 on May 12. It’s an IBD Leaderboard stock.

Amazon Business sells a broad line of goods, such as office supplies, tools, industrial equipment, tractor equipment and office products. Competitors in the B2B e-commerce sector include Staples, HD Supply Holdings, Office Depot, Grainger and Fastenal.

By Brian Deagon for www.investors.com

Wall Street’s love affair with Amazon has been rekindled following shares climbing by nearly 10% on Friday after Amazon reported a better-than-expected profit.

Amazon shares have been on a tear since early February, surging about 45%. Amazon is now back in breakeven territory for the year and less than 2% below the all-time high it hit in December.

Warren Buffett is a big fan of the company too apparently – even though his Berkshire Hathaway does not own the stock.

Buffett went out of his way several times to praise Amazon and CEO Jeff Bezos during Berkshire’s annual shareholder meeting on Saturday. He did so again on CNBC Monday morning.

Amazon’s triple-digit P/E ratio probably scares off Buffett – who is a consummate value investor.

But it’s telling that he is willing to admit how successful Amazon is – especially since it would appear that much of that success is coming at the expense of Walmart, which is one of Berkshire’s biggest investments.

Amazon passed Walmart in market value for the first time ever last July. It is now worth about $320-billion – nearly $110-billion more than Walmart.

Analysts think Amazon has a lot more room to run too. The consensus price target is just shy of $800 a share. That’s almost 20% higher than current levels.

R.J. Hottovy, an analyst with Morningstar, says that Amazon’s international units are starting to pick up steam. He expects that Amazon will add a lot more Prime members in Europe and Japan in the coming quarters.

He added that Amazon seems a little more focused now and is less prone to invest in non-core businesses that may not really help boost Amazon’s revenues and Prime member base. Remember the Fire Phone flop?

“The biggest investment risk with Amazon is Jeff Bezos’ brain. It all depends on how aggressive Amazon wants to be,” Hottovy says. “As long as Amazon’s investments build the user base, then I still think there is some upside to the stock.”

Clothing is one of those investments that should boost revenue and profits.

The company recently has started to sell its own private label clothing brands. John Blackledge, an analyst with Cowen, wrote in a recent report that he expects Amazon to become the biggest apparel retailer in the U.S. as early as next year.

Yes, Amazon often gets criticised for heavy investments in free shipping and new businesses.

But Michael Pachter, an analyst with Wedbush Securities, says those initiatives appear to be paying off. Gross margins surged in Amazon’s most recent quarter.

The stock is extremely expensive. It trades at nearly 130 times 2016 earnings estimates of $5.33 a share. But Pachter says that investors buying Amazon today are taking a much longer-term view.

“You’re not paying this much for Amazon because you like the quarter. You’re paying this much because you think earnings are going to go up a lot,” he says.

“The only reason for it to trade at this valuation is because people think Amazon will make $20 to $30 a share a year someday,” Pachter adds.

Buffett might even believe that. But don’t hold your breath waiting for him to buy the stock anytime soon. It’s still way too rich for his blood.

By Paul R. La Monica for www.abc17news.com

Amazon puts roots in SA

While global online retail company Amazon.com widens its net with online food shopping and walk-in bookstores, its Web services division is making inroads in South Africa.

Amazon Web Services says it is recruiting 250 people for its offices in Cape Town and Johannesburg.

The company offers cloud computing for other companies. Cloud computing refers to the on-demand delivery of IT resources and applications via the internet with pay-as-you-go pricing.

The head of technology and solutions architecture at Amazon, Attila Narin, says the company had recognised the potential for growth in South Africa where Cape Town and Jo’burg acted in perfect unison.

“Cape Town is ideal for the technical side of things, and Jo’burg is perfect for the customer-facing side of things. In fact, some of the core technology for Amazon’s cloud computing used across the globe was built right here in Cape Town,” says Narin, who is based in Luxembourg but worked in Cape Town from 2006 to 2008, and was back in the city this week.

“This city has an amazing pool of talent, as universities like UCT and Stellenbosch produce some of the finest engineering students on the continent. That is the main criterion for choosing our development centres, so Cape Town ticked the boxes.”

Narin says that Johannesburg, which opened its Amazon Web Services office last year, is “the economic heart of the country and the continent too, so it made sense to have our customer-facing presence there”.
Narin says the company’s successes in South Africa included Entersekt, Travelstart, and Medscheme.

Stellenbosch-based Entersekt developed South Africa’s first security solutions for mobile banking, resulting in a decline in credit card fraud.

Travelstart, an online booking service for flights and hotels, “shows how you go beyond the normal borders with cloud computing. It is now present in all of southern Africa and the Middle East”.

Medscheme uses cloud computing to keep patient records, making them “more accessible to medical service providers”.

Narin says South Africa was a “highly innovative and creative space for start-ups”.

By Tanya Farber for www.timeslive.co.za

Rock, paper, scissors. Amazon always seems to win.

Is there any sector that the Internet juggernaut isn’t taking down?

Its latest target is office supplies. Essentially, if you sell paper products, or anything that uses paper – say, notebooks or books – you’re facing challenging times.

No wonder that Staples, Office Depot, and Barnes & Noble are all “streamlining” operations and closing hundreds of stores.

As it awaits a federal judge’s ruling on its proposed merger with Office Depot, Staples just announced it was downsizing nationwide, with store closures, reduced hours, and layoffs.

Adam Riddle, 29, of Levittown, shopped at a Staples in Langhorne last week to buy a planning notebook for $16.99. He says the reason for the store closings was obvious:

“You can pretty much e-mail everything now,” says Riddle, a communications signal manager at Amtrak. “I only come here if I can’t get something at work.”

He’s right. All the office-supply players used to dabble in various media sales, ranging from CD-ROMs to software. Most of that has gone away or online.

Online dominance is the new norm for office supply sales,” says analyst Garrick Brown, head of retail research for Cushman & Wakefield. “The good news for Staples is that they are the dominant player still, thanks to its early embrace of e-commerce.

“Amazon certainly has made headway, as they have in every retail category,” he says. “Walmart also has picked up some online market share here. But the dominant player for office supplies is still Staples.

But for how long?

The company’s moves to close brick-and-mortar stores and shrink others are to better compete in a new retail reality starring Amazon, experts say.

Apparel retailers, such as the Gap and Macy’s, are deploying the same strategy “to become more nimble,” as they like to say, with a smaller store fleet.

Brown says Staples’ model, taking a 25 000-square-foot store and expanding it to 40 000 square feet, is now outdated. Such demand no longer exists with the shift to online shopping, and with schoolchildren using more laptops and iPads versus traditional notebooks and paper.

Staples is doing all it can to survive while trying to buy out Office Depot.

But the merger has met stiff resistance from the Federal Trade Commission on grounds that the new company would be too big and would lessen competitive pricing.

A hearing is set in federal court next month to see whether Staples can come up with a plan that the FTC will approve.

Anthony Chukumba, a senior research analyst at BB&T Capital Markets, says Staples is faced with “the perfect storm of reduced demand and increased competition”.

Staples generated approximately $21-billion in sales last year and currently has about 2 000 stores. Office Depot generated approximately $14-billion in sales and has just under 1 600 stores in North America.

“You just don’t need as much ink, toner, and paper as you once did in a digital world,” Chukumba says. “And who buys fax machines or CD-ROM discs anymore?”

“There’s no question there’s more competition from online retailers, like the Amazons of the world. Our research shows Amazon routinely undercuts Office Depot and Staples’ prices by over 20% on average,” he says.

“It shows what a robust competitor Amazon is. Amazon has been able to leapfrog Staples and Office Depot in terms of user experience, even though the office supply retailers had a huge head start from their legacy catalog businesses.”

Staples has begun to diversify its revenue stream the last few years, including expanding into janitorial and break room supply sales. This has allowed companies that are already Staples customers to order office cleaning and other products to get better deals and all-in-one delivery.

Staples now generates more than $1-billion of sales annually in this product category, according to Chukumba, and it’s one way to hedge its bets against the growing threat of Amazon.

Moody’s lead retail analyst Charlie O’Shea gave a glowing fourth-quarter 2015 review of Amazon. The online giant grew product retail sales by $3,5-billion, or 15% year-over-year, and expanded margins.

He contrasted Amazon’s performance to the possible Staples/Office Depot merger: “While we continue to believe in the merits of the transaction, especially as competition heats up in the office supply segment led by Amazon, the companies are fighting a tough uphill battle with the FTC,” O’Shea says.

And that’s why the paring continues at Staples, which offers same-day online delivery if orders are placed before 3pm and has an online pickup counter at every store.

“Staples has too many stores, and closing some is not a bad thing when you have this transformation going on online,” O’Shea says. “There’s no question that paper has seen better days.”

By Suzette Parmley for www.philly.com

Other than the winter holiday season, back-to-school (BTS) and back-to-college (BTC) are, together, the largest retail event of the year. In 2015, the National Retail Federation (NRF) anticipates that combined BTS and BTC spending in the US will reach $68-billion, of which BTS accounts for approximately $25-billion, says Ruth Hamer, director of Digital Marketing at Marketyze.

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