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This article is part of a series tracking the effects of the COVID-19 pandemic on major businesses, and will be updated. It was originally published on April 13.
Amazon.com Inc. would seem to have every conceivable business advantage during a pandemic that will force people to stay in — and work from — their homes: It is an e-commerce juggernaut, cloud-computing powerhouse and major player in the streaming wars, all businesses that are expected to remain strong.
Indeed, Amazon AMZN, +6.17% is one of the few tech companies whose financial estimates have improved since the start of the year, and one of only 30 S&P 500 SPX, -1.01% components to see shares gain in the first quarter of 2020, as the COVID-19 pandemic swept across the globe.
However, as Amazon has proved many times, its spending can easily outpace revenue even if sales are extremely strong. As the company ramps up hiring — a push to add 100,000 new workers recently grew by another 75,000 to meet demands in retail — its infrastructure, and bottom line, will be taxed.
Business in the age of COVID-19: Read how other large companies will be affected by the coronavirus
Befitting its advantageous perch, Amazon was the only retailer among the e-commerce companies covered by Wall Street firm Jefferies in which consumers are spending more since coronavirus, based on a Jefferies survey of 638 Americans in late March. By comparison, customers of Chewy Inc. CHWY, -5.56% , eBay Inc. EBAY, +2.74% and Etsy Inc. ETSY, +3.27% spent less.
Amazon is also likely to prosper from what experts call “winning trends” in hiring for the retail, cloud computing and streaming markets. Upwork Inc. UPWK, -0.41% Chief Executive Hayden Brown told MarketWatch the pandemic has “accelerated digital transformation” among companies, and those three markets have shown the most upside. Upwork’s digital platform lets businesses and freelancers connect and collaborate remotely.
Opportunities abound for Amazon, which is hiring 175,000 more full- and part-time workers in its distribution and delivery centers to get essential supplies to a nation crippled by coronavirus. (Amazon has about 800,000 employees worldwide.)
See also: Amazon to add 100,000 warehouse, delivery workers to handle spike in demand
Adding the equivalent of a workforce twice the size of Facebook Inc. FB, -0.22% will escalate the cost of operations, which could both hurt Amazon’s bottom line and tax its stretched infrastructure. This week, for example, Amazon said it would suspend shipping of non-Amazon packages in an attempt to keep pace with customer orders. The test program, called Amazon Shipping, will be paused in June because the company needs to shift workers toward fulfilling its own orders, the Wall Street Journal reported. Amazon and Walmart Inc. WMT, +2.87% are also facing shortages and delays of essentials such as toilet paper and cleaning supplies, according to other reports.
Because Amazon’s logistics operation is optimized for efficiency rather than responsiveness, it will likely continue to struggle under the weight of shifting demand and inconsistent replenishment volumes for at least several more months, Brittain Ladd, chief logistics and marketing officer at Pulse Integration, said in late March. Still, he anticipates Amazon will emerge as a grocery-shopping behemoth, via Whole Foods Market, on a par with Kroger Co. KR, +0.86% .
Separately, Amazon Prime Video ranked only behind Netflix Inc. NFLX, +7.01% in popularity among U.S. consumers based on playback/streams from March 16 to April 5, according to Reelgood, a film and TV streaming search engine service.
Amazon reports fiscal first-quarter results on April 23.
How the numbers are changing
Revenue: Average analyst expectations were $71.6 billion at the end of 2019, and have increased to $72.5 billion as of April 9. Revenue for the powerhouse Amazon Web Services have improved from $10.19 billion to $10.3 billion in that time period, according to FactSet. For the full year, FactSet expects revenue of $334.1 billion, nearly half ($160.7 billion) of which will come from online store sales.
Earnings: Average analyst expectations from FactSet were $6.35 per share at the end of 2019. As of April 9, they were $6.35 per share. For the full year, analysts expect earnings of $28.15 a share.
Stock movement: During the first three months of 2020, shares rose 6%. So far in 2020, Amazon shares are up 11%; the broader S&P 500 index SPX, -1.01% is down 15% this year.
What the company is saying
Amazon provides updates on a daily blog outlining its health and safety practices, grocery delivery and community outreach. However, the company has not said much else about COVID-19 in regulatory filings or press releases.
April 13: Amazon said it filled the 100,000 jobs announced in March, and would add an additional 75,000 employees. The company said it now expects more than $500 million in payroll increases, up from a previous estimate of $350 million, to reach its goal of increasing hourly employees wages by $2 an hour, and to double base pay for overtime hours.
April 9: Amazon said it plans to test front-line workers — and eventually all of its workers — for COVID-19. “Regular testing on a global scale across all industries would both help keep people safe and help get the economy back up and running,” the company said in a blog post. The online-retail powerhouse has started assembling equipment to build its first lab.
April 8: The company confirmed a Wall Street Journal report that Amazon Shipping — which handles non-Amazon and Amazon marketplace packages in a handful of U.S. cities that include Los Angeles — will be suspended starting in June. Amazon is pausing the service because it needs people and capacity to handle a surge in its own customers’ orders, the Journal reported.
March 16: Amazon said it will hire 100,000 more full- and part-time workers in the U.S. to ramp up fulfillment centers and transportation operations. “Getting a priority item to your doorstep is vital as communities practice social-distancing, particularly for the elderly and others with underlying health issues,” the company said. “We are seeing a significant increase in demand, which means our labor needs are unprecedented for this time of year.”
What analysts are saying
• “We believe Amazon’s broad selection in consumer staples and unparalleled shipping capabilities is allowing it to benefit from a desire to avoid crowded areas.” — Jefferies analyst Brent Thill, maintaining a buy rating and price target of $2,300, on March 29.
• “Amazon may elect to modify its logistics strategy as a result of the current environment — including pre-positioning more inventory to handle rapid changes in supply and demand. The company is already building ’Mothership’ mega-warehouses that feed regional and local distribution centers, and utilizing micro-fulfillment and automation. Overall, a reengineering of the logistics operation could cost Amazon $5-10 billion over the next 2-3 years.” — Baird Equity Research analyst Colin Sebastian, maintaining an outperform rating and price target of $2,275, on March 27.
