The end of an era is near for Amazon ($AMZN). In the third quarter of 2021, the Seattle-based company will undergo the first CEO transition in its 27-year history.
On fourth quarter 2020 earnings day, Amazon announced that legendary founder and wealthiest person in the world Jeff Bezos will step down as CEO in 2021. The company’s AWS (Amazon Web Services) chief executive Andy Jassy has been tapped to take over. Mr. Bezos will stay as executive chair.
The Amazon Maven discusses what could be expected of the new CEO, and what challenges he is likely to face in the first few years of his tenure.
Who is Andy Jassy?
Mr. Jassy joined Amazon early in the company’s life, in 1997, when the now CEO of AWS was in his late 20s and had just completed his Harvard MBA. He was charged with running Amazon’s cloud infrastructure division when it was still quite small, in the mid-2000s.
The chart below, showing AWS’ revenues and op profit since 2014, helps to explain why Andy Jassy has become a rock star at the Seattle HQ. Whether he can replicate the recipe of success in e-commerce and consumer goods and services remains to be seen – but at least the credentials are not lacking.
The new CEO’s challenges
The most immediate test that Andy Jassy will likely face will be gaining investors’ confidence. A leadership transition can be nerve-wrecking, and risk perception could increase. Worse yet in this case, Mr. Jassy has some big shoes to fill as the replacement of an admired founding CEO.
Almost concurrently, Andy will probably need to address issues of anticompetitive practices that Amazon has been battling with regulators, on and off, for years. Last year, I argued that antitrust could be one of the few secular headwinds plaguing Big Tech companies in the US.
The bigger, longer-term challenge will be to maintain Amazon on an aggressive growth path, despite the company having already reached $400 billion in annual revenues and $1.6 trillion in market value. Amazon stock currently trades at a rich 2020 P/E (price-to-earnings ratio) of nearly 60 times that can be mostly justified by hopes for substantially higher revenues, earnings, and cash flow in the far future.
Drop the ball on the growth trajectory, and Andy Jassy could witness destruction of shareholder value in this highflying tech and consumer stock.
Read more from the Amazon Maven:
- Amazon Stock 101: A Primer For AMZN Investors
- TheStreet’s Amazon Maven: One-Stop Shop For Amazon Stock Investors
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)