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Is the Amazon Story Wildly Inflated?

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Amazon’s effect on retail is an amazing story, but despite its disruptive nature, the company hasn’t been generating profits or managing risk nearly as well as its retail competitors. Now Charlie O’Shea, an analyst from Moody’s is attempting to deflate the Amazon bubble by poking holes in the myths surrounding the company’s performance.

MarketWatch reports that O’Shea believes Amazon’s stock performance potential is overshadowing the on the ground operating performance advantages of its competitors.

Amazon’s stock AMZN, +0.29% has outperformed rivals, but it’s mostly based on the company’s growth story, and particularly the success of its cloud business, Amazon Web Services, O’Shea wrote in a new report.

“That potential is overshadowing the superior real-

time operating performance of Amazon’s key retail competitors,” O’Shea wrote. “The emphasis on stock performance is, in our view, forcing brick-and-mortar competitors toward managing more irrationally for short-term performance just when they’re confronting secular change.”

He cited as an example Staples Inc.’s SPLS, -0.05% decision to sell itself to private-equity firm Sycamore Partners as a way to boost shareholder value.

The perception that Amazon is poised to take over the grocery business via its acquisition of Whole Foods, which closed this week, is another myth, said O’Shea.

“Online sales still account for only about 10% of overall U.S. retail sales, with a much lower percentage in the grocery segment, leaving the big brick-and-mortar retailers, led by Walmart, still really formidable competitors in the industry,” he wrote.

Read more here.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
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