Last week Jeff Bezos left his post as CEO of Amazon (NASDAQ:AMZN), the company he built from a small online bookseller into what is on track to become the largest company in the world. It was with little fanfare that Andy Jassy took over as CEO on July 5, but he’s now responsible for steering the tech giant into its next phase. Investors who are curious about what will happen next shouldn’t worry. Things might change, but here are two reasons to be excited about the move.
1. A fresh perspective when things are good
Amazon is coming off of a record year with $386 billion in sales and more than $8 billion in profits. 2020 was a year like no other, and Amazon’s keeping it up with a 44% sales increase in the first quarter, starting the year off with almost $110 billion in sales.
Some might argue that this is the wrong time for a leader to pick up and leave, but Bezos sees this as the right time to hand over the reins. He said in the announcement, “Right now I see Amazon at its most inventive ever, making it an optimal time for this transition.” For a company that has advanced through taking risks and challenging the norm, that’s not a surprising sentiment.
There are many reasons Bezos would choose to leave at this point in time. Some analysts have pointed out that the company is undergoing regulatory scrutiny for its size and how it relates to its workers. Some workers organized a protest last summer promoting worker rights, and there was a highly anticipated, but ultimately unsuccessful, vote in April to form a union for Amazon workers in Alabama. It’s also a personal decision for Bezos to work on his space company, as well as to lead Amazon with his vision — he’s staying on as executive chairman — without getting bogged down in the practical details of running the company’s day-to-day affairs.
But it could be a great step for Amazon. Jassy is coming in when Amazon is on top, instead of Bezos riding the high and potentially getting stale, and he can bring a fresh perspective to keep leading it forward.
2. A proven leader in Amazon’s ranks
On the other hand, Jassy is far from a newcomer, having started his career there and staying on for the past 24 years. He created AWS, or Amazon Web Services, and has served as its CEO since 2016. AWS has since become a huge part of Amazon’s top-line growth, accounting for 12% of 2020 sales. It’s even more important, though, for its contribution to the bottom line — it represented more than half of the operating income in 2020.
According to The Wall Street Journal, Bezos has had Jassy in mind as his successor for a long time, and he has been trained in his former boss’s style. Bezos said in his last letter to shareholders, “Andy is brilliant and has the highest of high standards. I guarantee you that Andy won’t let the universe make us typical.”
Amazon stock had been somewhat stagnant this year after hitting $3,500 per share briefly and then coming down, but it has skyrocketed over the past two weeks, just around the time Jassy entered his new role. That may, at least partially, be because the U.S. government announced last week that it’s canceling its contract with Microsoft for cloud computing and is likely to reward part of a new contract to AWS. That’s great news for AWS and Amazon, and Amazon stock is up 14% year to date as of this writing.
With Andy Jassy in the driver’s seat, Amazon investors should expect the company to keep innovating, scaling, and dominating. They should also see the stock price rising in the long run.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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