Amazon (AMZN) is entering some strange territory. America’s favorite retailer is growing and laying people off at the same time.
For example, Stockrow estimates Amazon’s revenues grew by 9.37% in the quarter that ended on 31 April 2023. Yet Amazon began laying off 9,000 Amazon Web Services (AWS) and human on 26 April 2023, CNBC reports. Those layoffs were in addition to 18,000 people Amazon laid off in November 2022.
Amazon’s workforce fell from 1.608 million in 2021 to 1.541 million at the end of 2022, Exploding Topics reports. In 2022, Amazon’s workforce shrank by 67,000 after growing by 310,000 in 2021.
The layoffs are part of Amazon CEO Andy Jessy’s aggressive cost cuts. Those cost cuts include a hiring freeze for Amazon’s corporate jobs, and slower fulfillment center building.
Amazon Keeps Growing
Amazon (NASDAQ: AMZN) is growing with fewer employees. For example, Amazon’s quarterly revenues grew from $116.444 billion on 31 March 2022 to $127.358 billion on 31 March 2023.
Similarly, Amazon’s quarterly gross profit grew from $49.945 billion on 31 March 2022 to $59.567 billion on 31 March 2023. Moreover, the quarterly operating income grew from $3.669 billion on 31 March 2022 to $4.774 billion on 31 March 2023.
Thus, Amazon’s growth continues as it lays off 27,000 people. Cynics will speculate that layoffs could help Amazon (AMZN) make more money. One reason for that Amazon, like many tech companies, employed many people it did not need. For example, redundant software engineers.
Labor Troubles at Amazon (AMZN)
Amazon’s labor troubles are getting worse and spreading to the company’s highest levels.
For instance, staffers at Amazon’s corporate headquarters plan to walkout on 31 May 2023, The Washington Post reports. Workers are angry at Amazon’s return to the office policy. The walkout is not a strike, instead, workers plan a protest to show their power.
Hence, many tech workers think they have a right to work-from-home. This will create problems for companies like Amazon (AMZN) where executives work from home but order accountants and software engineers back to the office.
How Much Cash is Amazon (AMZN) Generating?
Amazon (AMZN) is generating more cash. For example, the quarterly operating cash flow rose from -$2.79 billion on 31 March 2022 to $4.788 billion on 31 March 2022.
Amazon can generate enormous amounts of cash on occasion. It reported a quarterly operating cash flow of $29.173 billion on 31 December 2022.
Impressively, Amazon reported a $49.734 billion quarterly operating cash flow on 31 March 2023. The quarterly operating cash flow rose from $36.599 billion on 31 March 2022 and $19.075 billion on 31 December 2022. Hence, Amazon is still a cash-rich company.
Amazon had $60.405 billion in cash and short-term investments on 31 March 2023. However, the cash and short-term investments fell from $66.385 billion on 31 March 2022 and 70.026 billion on 31 December 2022.
Amazon is still borrowing enormous amounts of money. It reported a quarterly financing cash flow of $6.364 billion on 31 March 2023. The quarterly financing cash flow rose from $1.99 billion on 31 March 2022 and $86 million on 31 December 2022.
Consequently, Amazon’s Total Debt grew from $63.719 billion on 31 March 2022 to $82.004 billion on 31 December 2022. However, the Total Debt fell to $67.084 billion on 23 March 2023.
What Value Does Amazon Offer?
I consider Amazon (AMZN) a value investment because it had $464.378 billion in Total Assets on 31 March 2023. The Total Assets grew from $410.767 billion on 31 March 2022.
Conversely, Mr. Market paid $115 for Amazon shares on 25 May 2023. Amazon’s share price rose from $104.10 on 24 May 2022. I consider Amazon a cheap-cash rich company. The only problem I have with Amazon is that it does not pay a dividend. I think Amazon should pay a dividend. The company has the cash to pay that dividend.
Amazon’s value includes an enormous footprint. For example, Amazon had had 1,285 fulfillment facilities in the United Stats in the first quarter of 2023 and plans to open 231 more, MWPVL estimates. Plus, Amazon had 1,088 fulfillment facilities outside the US and plans to open 52 more in the first quarter of 2022.
Amazon is closing facilities. Amazon closed or canceled plans for 90 US facilities in 2022.
Amazon’s Edge
Hence, Amazon’s fulfillment capacity exceeds competitors. For example, Walmart operated 31 dedicated ecommerce fulfillment centers in June 2022.
I think the fulfillment capacity gives Amazon (AMZN) an edge in ecommerce competitors cannot match. Thus, I think Amazon will dominate US ecommerce for the foreseeable future.
Amazon’s other edge is Prime. Exploding Topics estimates there are over 200 million Amazon Prime Members. However, Amazon has not released a count of Prime Members since 2020. Amazon Prime’s membership grew from 150 million in 2019 to 200 million in 2020. Prime helps Amazon because it provides a source of float or cash.
Amazon Prime provides float because a membership costs $139 a year or $14.99 a month. I calculate Prime Memberships could add $27.8 billion a year to Amazon’s bottom line if all the users pay $139 a year. Prime drives Amazon growth because paying $14.99 a month encourages people to buy on Amazon.
I predict Amazon’s growth will continue. Therefore, all value investors need to consider adding Amazon to their portfolios.
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