Andy Jassy isn't Jeff Bezos. But from all accounts, he is a capable exec who shares Bezos' willingness to break with convention, as well as to make big long-term bets on high-upside projects and initiatives.
And as CFO Brian Olsavsky indicated in February, Jassy, who officially became Amazon.com's (AMZN) CEO on July 5 after 18 years as the head of AWS, will be looking to put his own imprint on Amazon -- even if Bezos (as executive chairman) will still be involved in big strategic decisions.
With that in mind, here are a few ways in which Jassy could shake things up at Amazon, without changing the company's broader strategic focus and ambitions.
1. Overhauling Amazon's Web and Mobile Shopping Experiences
While Amazon has some enormous e-commerce strengths -- among them, unmatched product selection, strong customer service and the ability to cost-effectively support rapid delivery for tens of millions of items -- the user experience delivered by its shopping website and apps tends to get more mixed reviews.
Among the things that tend to receive complaints: Counterfeit/knockoff goods from marketplace sellers, cluttered product pages, numerous duplicate or irrelevant listings within search results and a relative lack of the kinds of curated shopping experiences that many rivals are now eager to deliver.
One only has to look at the websites and apps of rivals such as Etsy (ETSY) and Chewy (CHWY) to see how Amazon's own shopping properties could arguably benefit from a facelift. And with Bezos, who reportedly took a pretty hands-on approach to things such as UI/UX decisions, stepping down as CEO, such an overhaul might finally happen.
2. Dialing Up AWS' Sales and Marketing Investments
Though AWS is still seeing strong double-digit sales growth, Microsoft's (MSFT) Azure and Alphabet's (GOOGL) Google Cloud Platform (GCP) have been steadily growing at meaningfully faster rates. In calendar Q1, AWS' revenue rose 32% annually, while Azure's rose 50% and Alphabet's Google Cloud segment -- it covers both GCP and the slower-growing Google Workspace app business -- posted 46% growth.
Given his background, Jassy has to be pretty well-aware of AWS, Azure and GCP's respective growth rates. And with top rival Microsoft aggressively using its tremendous go-to-market resources to help Azure gain share, Jassy could be willing to step up AWS' sales and marketing investments to help win more large enterprise deals, even if it means temporarily depressing AWS' high operating margins.
3. Making Big Investments in Grocery Delivery
As I wrote last year, Amazon's fulfillment centers and last-mile delivery assets stand to give it long-term cost advantages in grocery delivery relative to bricks-and-mortar rivals. Already, these cost advantages appear to be an important reason why Amazon (in contrast with rivals) charges no delivery fee to Prime members on $35-plus orders for both Whole Foods and Amazon Fresh grocery deliveries.
However, in the short-term, retailers such as Walmart (WMT) and Target (TGT) have been able to scale out their grocery delivery operations much faster than Amazon, by leveraging their massive retail store footprints for inventory and fulfillment (and often, also leveraging gig-economy partners such as Instacart for delivery).
With Amazon having already spent a fortune over the last couple of years to build new fulfillment centers and expand its delivery operations, the timing seems right for the company to aggressively scale out its Amazon Fresh delivery business, whether in terms of geographic reach, product selection or the volumes it can support in a given metro area. Jassy, who from his time running AWS already has a lot of experience growing a capex-intensive business for which scale, reach and product selection matter a lot, seems the type of person who would be willing to make such investments.
4. Buying Back Stock
Amazon now stands alone among U.S. tech giants in not carrying out any stock buybacks (a $5 billion repurchase program created in 2016 remains unused). This feels like a legacy of the many years during the Bezos era in which Amazon either lost money or was just slightly profitable, as the company kept investing and pricing aggressively for the sake of future growth.
But today, Amazon is quite profitable in spite of its still-heavy-spending ways. From April 2020 to March 2021, the company generated $16.8 billion in free cash flow (FCF) after backing out lease and financing payments, even as it spent a ton on capex and incurred large COVID-related expenses. FCF for the next 12 months will almost certainly be higher.
Throw in a $40 billion-plus net cash balance, a blue-chip credit rating and greater antitrust scrutiny of large acquisitions by tech giants, and the case for Amazon launching a buyback program -- if just to offset the dilution caused by stock compensation -- is quite strong. And just as Tim Cook proved more willing than Steve Jobs to have his company buy back its stock, the same might hold for Jassy relative to Bezos.
(Amazon, Microsoft, Walmart and Alphabet are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
