Brad Erickson, Internet Services Senior Analyst at RBC Capital Markets, provides his insights on Amazon’s recent earnings report. Erickson highlights the company’s strong performance in various segments, including e-commerce, cloud computing, and advertising.
Emizentech, a renowned digital commerce provider, will exhibit at Seamless Middle East 2024, showcasing its expertise and innovative solutions to enhance customer experiences and boost sales. The event will focus on leveraging technologies to optimize e-commerce operations and drive success in a competitive digital landscape.
Amazon, a tech behemoth, has witnessed both meteoric growth and recent challenges. Despite its global presence and diverse operations, the company’s early days were marked by uncertainty, with founder Jeff Bezos estimating a mere 30% chance of success. Over the years, Amazon has expanded exponentially, employing thousands worldwide. However, recent headlines have painted a different picture, with layoffs and restructuring across various departments, including its cloud computing arm, AWS. Amidst these transitions, the company remains committed to supporting affected employees while adapting to evolving market dynamics.
In a recent note, Goldman Sachs analysts have upgraded the implied value of Blinkit, the quick commerce platform acquired by Zomato in 2022, to an impressive $13 billion. This valuation now exceeds Zomato’s core food delivery business, valued at Rs 98 per share. The upgrade stems from higher gross order value (GOV) estimates for Blinkit, which have exceeded expectations by approximately 50 percent over the past year. Despite being acquired for $568 million in 2022, Blinkit’s implied valuation has grown significantly to $13 billion, representing a six-fold increase year-over-year.
Analysts predict a robust growth trajectory for Blinkit, with a projected 53 percent CAGR in GOV between 2024 and 2027. This growth is expected to contribute to a 32 percent adjusted revenue CAGR for Zomato on a consolidated basis, making it one of the highest growth projections within Goldman Sachs’ food delivery and India internet coverage.
As Zomato continues to enhance profitability, particularly in the quick commerce segment, Goldman Sachs anticipates further potential for its valuation multiples to expand. The brokerage highlights that Zomato’s EBITDA margin is among the highest among global food delivery platforms, a trend expected to continue in the quick commerce business.
Consequently, Goldman Sachs has maintained a ‘buy’ recommendation on Zomato’s stock and increased the target price to Rs 240 from Rs 170. Out of 28 analysts covering Zomato, 24 recommend ‘buy’, while the remaining have a ‘hold’ rating. The brokerage believes that the market is still undervaluing Zomato’s growth and profit potential in the online grocery segment. Zomato’s shares were trading at Rs 185.55, up 2 percent, at 12 pm on April 26.
Former Amazon aggregator, Thrasio, is undergoing a significant shakeup in its leadership amidst Chapter 11 bankruptcy proceedings. CEO Greg Greeley and several other senior executives, including the finance chief and technology head, announced their resignations. This follows Thrasio’s initial filing for bankruptcy in February due to factors such as fading pandemic-driven e-commerce surge, unsold inventory accumulation, and excessive debt. The company plans to lay off employees at various levels to reduce operational expenses and meet financial obligations. Thrasio is also considering selling off certain brands to streamline its portfolio. The Unsecured Creditors Committee is currently investigating the loss of over $3 billion in value by Thrasio in a short period.
UPS, the $124 billion carrier, has struggled since inflation began to accelerate in early 2021. Data shows UPS is down 10.44% since May 2021, while the S&P 500 has gained 25.75% during the same period. Management’s guidance suggests little to no revenue growth this year, with rising costs and declining shipping volumes. The company’s aggressive capital expenditure plans and reliance on automation fail to address its dependence on unionized labor and the challenges posed by competitors like Amazon. Analysts predict only 4-5% revenue growth for UPS over the next several years, yet the stock trades at a growth multiple of nearly 18x predicted forward GAAP earnings. Given its slowing revenue, declining EPS, and valuation concerns, UPS should not be trading at more than a multiple of 12-14x expected forward earnings.
In the face of rising inflation, American consumers are flocking to the Chinese e-commerce platform Temu for affordable shopping options. Temu has captured 17% of the U.S. market share, challenging traditional retailers such as Amazon, Dollar Tree, and Five Below. The platform offers a wide range of products at competitive prices, complemented by discount codes for further savings. Temu has emerged as the No. 1 Shopping App on Apple’s App Store, surpassing Amazon, Target, and Walmart. Orders typically arrive within 10 days from China, but Temu has recently partnered with U.S. warehouses to expedite shipping times. The platform’s success has spurred concern among U.S. dollar stores like Dollar Tree and Dollar General, which have announced closures and layoffs due to changing consumer demands and economic challenges.
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Stifel’s analysis suggests that Amazon’s recent service announcement, which incurs additional costs for Prime subscribers, is unlikely to lead to a significant partnership with Instacart. The service’s price and basket size thresholds align with Instacart’s, limiting the potential for cost savings for Amazon customers. Additionally, the move is not anticipated to cause a substantial shift of Instacart’s existing customer base to Amazon due to the similar cost dynamics between the two services. However, Stifel acknowledges that Amazon’s entry into this space could hinder Instacart’s growth with new customers.
Shares of Maplebear (CART), known as Instacart, experienced a significant decline on Tuesday due to Amazon’s announcement of a comparable grocery delivery service for Prime members. Amazon’s subscription plan offers unlimited delivery in over 3,500 locations across the U.S. for orders exceeding $35 from Whole Foods, Amazon Fresh, and various local retailers. Instacart+ membership currently stands at $9.99 per month or $99 per year, providing unlimited free delivery on orders of $35 or more. Amazon’s competitive pricing and additional perks, such as free one-hour delivery windows and priority access to Recurring Reservations, have raised concerns among Instacart investors.
