- Amazon has gained 1.27% since December 9, 2021, but lost 1.81% YTD.
- Amazon’s global minimum tax inclusion will be based on cloud computing and advertising revenues.
- Amazon introduced the online pharmacy to boost PillPack’s revenues.
Amazon.com Inc. (AMZN) gained 2.07% on June 8, 2021, to close at $3,264.11 from the previous day. Post-market trading of the e-commerce giant inched up 0.15% (adding 4.89 points) to close at $3,269.00. The stock has gained 1.27% since December 9, 2021, buoyed by strong gross profit growth in Q1 2021 at $48.115 billion from $46.271 billion in Q4 2020 (+3.99%). However, Amazon’s revenue declined 13.57% from $125.555 billion in Q4 2020 to $108.518 billion in Q1 2021, while it surged 41.47% YoY. The share price has lost 1.81% year-to-date.
Amazon’s share price YTD
Despite the quarterly revenue decrease, Amazon was included in the proposed global minimum tax ratification plan by the G7.
The proposed plan by the G7 seeks to have international companies whose profit margin is above 10% pay a global minimum tax in the respective countries. Amazon was included in this category despite announcing that its operating margin in the FY 2021/22 would be 7.1%. Amazon’s inclusion is based on the more profitable sections of the company- cloud computing under Amazon Web Services (AWS) and advertisements. The company’s heavy investments (with total liabilities at $219.757 billion) and minimal retail profits have weighed down the overall revenues. Under this special consideration, only the two segments will be considered for the tax plan.
AWS — Amazon’s most profitable segment — raked in $13.503 billion in Q1 2021 (an increase of 32.1% YoY). Operating income increased by 30.03% (YoY) to $29.775 billion in Q1 2021, with AWS accounting for 47.1% of this total. Advertising revenues surged 76.8% at $6.905 billion in Q1 2020 (YoY) from $3.906 billion in Q1 2020. With the completion of the tax plan expected in July 2021, G7 leaders in Europe under the Organization for Economic Cooperation and Development (OECD) are looking at ways of including multinational e-commerce companies. Additionally, the proposed 15% minimum tax is seen as a solution to the availability of tax havens used by international companies to evade taxes.
In a bid to improve the online pharmacy market, Amazon announced an offer of up to 13 prescription drugs at $6 for six months. The drugs are used in the treatment of diabetes, blood pressure, among other conditions. Customers will require a prescription before ordering, and the company will also include a 2-day free shipping service in the offer.
Amazon’s online pharmacy went live in November 2020, two years after the acquisition of PillPack, an e-commerce pharmacy firm. The prescription drug market in the US is estimated to be worth $360 billion. Amazon’s pharmacy is a major step towards tapping into this mine and a way to boost PillPack’s fortunes. The company will buy the drugs in bulk and at a discount then offer two annual deliveries to customers. Other retailers in the prescription market include Walmart Inc. (WMT), Kroger Co. (KR), and Costco Wholesale Corp (COST). Amazon announced that Prime subscribers (under this program) will save 80% when they shop generic drugs and 40% on brand-name-based prescription drugs.
Six-month prescription medications are not covered by most insurance companies in the US. Amazon’s target will give an affordable medication plan for the uninsured and insured population.
Amazon trading Chart
Amazon is trading above the 200-day SMA pegged at 3214.08. The stock hit a significant level after it crossed 3246.07. Buying activity is yet to increase among traders since the 14-day RSI is at 49.52.