Andy Jassy, CEO of Amazon and then CEO of Amazon Web Services, speaks at the WSJD Live conference in Laguna Beach, California, October 25, 2016.
Mike Blake | Reuters
Throughout its first 25 years as a public company, Amazon has operated under a singular mantra, often to the chagrin of Wall Street: growth is more important than profits.
“We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions,” Bezos wrote.
But with three-quarters of 2022 in the books, it’s clear that the tone has changed. Andy Jassy, who took over as CEO in July 2021, has been in cost-cutting mode to preserve cash as Amazon confronts slowing sales and a gloomy global economy. The stock is down 33% for the year, more than the 25% drop in the S&P 500 and is on pace for its worst year since 2008.
On the recruiting front, Amazon is freezing hiring for corporate roles in its retail business. And last month’s annual hardware event, which normally showcases a roster of gadgets and robots that may or may not still be around in a year or two, was noticeably constrained compared to prior launch events.
“If we look at everything collectively, Amazon seems to care a little more about margin than they have historically,” said Tom Forte, an analyst at D.A. Davidson who recommends buying the stock.
Jassy addressed the recent efforts to rein in costs at Amazon’s global all-hands meeting on Monday.
“Good companies that last a long period of time, who are thinking about the long term, always have this push and pull,” Jassy said at the meeting, according to excerpts shared with CNBC. “There are some years where they’re expanding really broadly. Some years where they’re checking in and working on profitability, tightening the belt a little bit. And sometimes when you have multiple businesses like we do at Amazon, some businesses are expanding at the same time that others are checking in.”
Amazon is far from alone in feeling the pinch. Fellow tech giants Meta and Alphabet have also been cutting costs to reflect a challenging macro environment and a dramatic slowdown after a decade of consistent growth. Companies across the tech sector have announced layoffs and hiring freezes or have lowered their hiring targets for the coming months.
Not that Amazon has put the brakes on all new spending. The company has been on a buying spree in recent months, agreeing to acquire primary care provider One Medical for $3.9 billion, Roomba maker iRobot for $1.7 billion and Belgian warehouse robotics company Cloostermans for an undisclosed amount. The company also said it would spend about $1 billion over the next year on wage increases and expanded benefits for front-line workers, and it has plans to hire 150,000 employees to help manage the holiday rush.
“We have an enormous amount of things that we’re investing in and that will continue,” Jassy said at the meeting, referencing Alexa, Prime Video and grocery as examples of some areas where Amazon continues to spend. “The trick for us during this time is just to balance those long-term investments and bets and customer experiences that we believe are the future of the company, along with really focusing on delivering along the way.”
The recent trend of belt-tightening has raised a longer-term question because it’s coincided with the company’s first ever change in leadership at the top after Bezos’ departure. The change on Jassy’s watch has prompted some analysts and former employees to wonder whether there’s a permanent shift in strategy underway or a temporary reset reflecting economic uncertainty.
Bezos built a reputation as a fearless entrepreneur willing to make big risky bets that could require hefty investment and may not generate meaningful revenue for years, if ever. No wager was bigger than Amazon Web Services, the cloud-computing unit that Amazon launched in 2006 and that Jassy led until his promotion last year.
More recent projects under Bezos included self-driving robotaxis, cashierless stores and delivery drones, all in pursuit of making life easier for customers.
Bezos ultimately axed plenty of products that didn’t pan out after launch. One of the most infamous examples is the Fire Phone, Amazon’s first smartphone that was discontinued in 2015, a year after its debut. Other endeavors with a short shelf life included a restaurant delivery service, social media feed, a device designed to replenish items with one click, a ticketing service, an auction site and an online wine store.
“They’re completely unafraid to kill something that’s not working,” said Craig Berman, a former Amazon vice president for global communications. “That’s never been a problem for them in the past.”
As the head of AWS, Jassy was at the center of Amazon’s profit engine, which gave the company the fuel to invest elsewhere. But since taking over as CEO of the parent company, Jassy has had to navigate the biggest jump in inflation in 40 years, supply shortages and an aggressive organized labor push that’s challenged the company’s long-standing anti-union stance.
More cuts may be coming
He’s putting in place cuts at a time when Wall Street has little appetite for the kind of experimental high-risk investing that defined the Bezos era. In July, Amazon reported its third straight quarter of single-digit revenue growth, largely due to weakening demand in its core online stores business.
Jassy is also working to dial back Amazon’s Covid expansion, which left it saddled with too much warehouse space and too many staffers. Amazon reduced its headcount by 99,000 people to 1.52 million employees at the end of the second quarter after almost doubling in size during the pandemic.
More slashing could be on the docket.
Amazon is in the middle of its annual planning process, which occurs in two phases, referred to as “OP-1” and “OP-2.” OP stands for “Operating Plan.” Former Amazon employees Colin Bryar and Bill Carr wrote about the process in their 2021 book, “Working Backwards: Insights, Stories, and Secrets from Inside Amazon.”
OP-1 typically begins during the summer and involves months of preparation and planning. Each team puts together a proposal outlining key initiatives for the upcoming year, including any requests for funding or new hires. OP-1 documents are typically submitted before the start of the fourth quarter, which covers the critical holiday shopping period, and are reviewed by Amazon’s senior leadership team, called the S-Team.
The second phase, OP-2, takes place in January. That’s when teams finalize their annual plans, potentially tweaking them depending on fourth-quarter performance.
With the risk of recession on the rise, Amazon could be looking at further reductions in its investments if the holiday quarter is weaker than anticipated, a former Amazon manager told CNBC. Another ex-manager from the company said Jassy may be more deliberate about what spending requests he approves as a signal for where Amazon plans to focus given the uncertainty. Both former employees requested anonymity in order to speak candidly.
An Amazon spokesperson said in a statement that the company continuously evaluates “the progress and potential of our products and services to deliver customer value, and we regularly make adjustments based on those assessments.”
Layoffs unlikely
Still, don’t expect to see mass layoffs from Amazon even as the company curtails spending, or pulls the plug on some projects.
When Amazon winds down a business, it typically offers employees the chance to apply for a job elsewhere in the company, several former employees told CNBC. They’re usually given a window of one to three months to look for another role and have the opportunity to meet with various business leaders during that time.
“Amazon is not going to let good talent walk out the door,” said Andrea Leigh, a former Amazon executive who spent almost a decade at the company across a number of different businesses.
There can still be job losses. After Amazon announced it was winding down its telehealth service Amazon Care, it said 159 employees could be laid off. Another 236 employees will be let go from Care Medical, an independent company that was contracted by Amazon to treat Care patients.
One new invention that Jassy may be counting on to goose revenue is a second Prime Day sale. Taking place Tuesday and Wednesday of this week, it’s the first time Amazon has had two of its discount bonanzas in the same year since it launched Prime Day in 2015.
Ahead of its third-quarter earnings report later this month, the multiday shopping event may provide Amazon with an early sneak peek at what’s coming in 2023.
On June 6, online real estate service Opendoor was so desperate to get its beaten-down stock price back over $1 and stay listed on the Nasdaq that management proposed a reverse split, potentially lifting the price of each share by as much as 50 times.
The stock inched its way up over the next five weeks.
Then Eric Jackson started cheerleading.
Jackson, a hedge fund manager who was bullish on Opendoor years earlier when the company appeared to be thriving and was worth roughly $20 billion, wrote on X on Monday that his firm, EMJ Capital, was back in the stock.
“@EMJCapital has taken a position in $OPEN — and we believe it could be a 100-bagger over the next few years,” Jackson wrote. He added later in the thread that the stock could get to $82.
It’s a long, long way from that mark.
Opendoor shares soared 189% this week, by far their best weekly performance since the company’s public market debut in late 2020. The stock closed on Friday at $2.25. The stock’s highest-volume trading days on record were Wednesday, Thursday and Friday of this week.
Jackson said in an interview on Thursday that the bulk of his firm’s Opendoor purchases came when the stock was in the 70s and 80s, meaning cents, and he’s bought options as well for his portfolio.
Nothing has fundamentally improved for the company since Jackson’s purchases. Opendoor remains a cash-burning, low-margin business with meager near-term growth prospects.
What has changed dramatically is Jackson’s online influence and the size of his following. The more he posts, the higher the stock goes.
“There’s a real hunger for buying the next big thing,” Jackson told CNBC, adding that investors like to find the “downtrodden.”
It’s something Jackson’s firm, based in Toronto, has in common with Opendoor.
When Opendoor went public through a special purpose acquisition company in 2020, it was riding a SPAC wave and broader gains driven by low interest rates and Covid-era market euphoria. Investors pumped money into the riskiest assets, lifting money-losing tech upstarts to astronomical valuations.
Opendoor’s business involved using technology to buy and sell homes, pocketing the gains. Zillow tried and failed to compete.
Opendoor shares peaked at over $39 in Feb. 2021 for a market cap just above $22.5 billion. But by the end of that year, the shares were trading below $15, before collapsing 92% in 2022 to end the year at $1.16.
Rising interest rates hammered the whole tech sector, hitting Opendoor particularly hard as increased borrowing costs reduced demand for homes.
Jackson, similarly, had a miserable 2022, coinciding with the worst year for the Nasdaq since 2008. Jackson said his key client withdrew its money at the end of the year, and “I’ve been small ever since.”
‘Epic comeback’
While his assets under management remain minimal, Jackson’s reputation for getting in early to a rebound story was burnished by the performance of Carvana.
The automotive e-commerce platform lost 98% of its value in 2022 as investors weighed the likelihood of bankruptcy. In the middle of that year, with Carvana still far from bottoming out, Jackson expressed his bullishness. He told CNBC that April that he liked the stock, and then promoted its recovery on a podcast in June. He also said he liked Opendoor at the time.
Investors willing to stomach further losses in 2022 were rewarded with a 1,000% gain in 2023, and a lot more upside from there. The stock closed on Friday at $347.52, up from a low of $3.72 in Dec. 2022, and almost triple its price at the time of Jackson’s appearance on CNBC in April of that year.
After Carvana’s 2022 slide, “then obviously began an epic comeback,” Jackson said. Opendoor, meanwhile, “continued to roll down the mountain,” he said.
Jackson said that the fallout of 2022 led him to pursue a different method of stockpicking. He started hiring a small team of developers, which is now four people, to build out artificial intelligence models. The firm has experimented with several models —some have worked and some haven’t — but he said the focus now is using what he’s learned from Carvana to find “100x” opportunities.
In addition to Opendoor, Jackson has been promoting IREN, a provider of power for bitcoin mining and AI workloads, and Cipher Mining, which is in a similar space. He’s seen his following on Elon Musk‘s social media site X, which he said was stuck for years between 32,000 and 34,000, swell to almost 50,000. And after a lengthy lull, investors are reaching out to him to try and put money into his fund, he said.
Jackson has a lot riding on Opendoor, a company that saw revenue and number of homes sold slip in the first quarter from a year earlier, and racked up almost $370 million in losses over the past four quarters.
In early June, Opendoor announced plans for a reverse split — ranging from 1 for 10 to 1 for 50 — to “give us optionality in preserving our listing on Nasdaq.” With the stock now well over $1, such a move appears less necessary, as shareholders prepare to vote on the proposal on July 28.
“I think it’s a terrible idea,” said Jackson. “Those things usually further cement a company’s move into oblivion rather than hail some big revival.”
Opendoor didn’t respond to a request for comment.
Banking on growth
Analysts are projecting a more than 5% drop in revenue this year, followed by 20% growth in 2026 and 12% expansion in 2017, according to LSEG. Losses are expected to narrow over that stretch.
Jackson said his analysis factors in projections of $11.5 billion in revenue for 2029, which would be well over double the company’s expected sales for this year. He looked at the multiples of companies like Zillow and Carvana, which he said trade for 4 to 7 times forward revenue. Opendoor’s forward price-to-sales ratio is currently well below 1.
With Zillow and Redfin having exited the instant-buying home market, Opendoor faces little competition in allowing homeowners to sell their property online for cash, rather than going through an extended bidding, sales and closing process.
Jackson is banking on revenue growth and increased market share to lead to a profitable business that will push investors to value the company with a multiple somewhere between Zillow and Carvana. At $82, Opendoor would be worth about $60 billion, which is roughly 5 times projected 2029 revenue.
Jackson said his model assumes that “like Carvana, Opendoor can prove that it can permanently turn the tide and get to sustained profitability” so that the “market multiple would get reassessed.”
In the meantime, he’ll keep posting on X.
On Friday, Jackson wrote a thread consisting of 11 posts, recounting the challenge of having “99.5% of my AUM” disappear overnight after his primary investor pulled out in 2022.
“Translation: he fired me for losing him too much money,” Jackson wrote. He said he almost shut down the fund, and was even encouraged to do so by his wife and accountant.
Now, Jackson is using his recent momentum on social media to try and attract investor money, while still reminding prospects that he could lose it.
“All I have is my reputation,” he wrote, “and, unless I keep picking good stocks, it will be gone.”
PERTH, AUSTRALIA – NOVEMBER 18: Chris Martin of Coldplay performs on stage at Optus Stadium on November 18, 2023 in Perth, Australia. (Photo by Paul Kane/Getty Images)
Paul Kane | Getty Images Entertainment | Getty Images
Astronomer, a provider of open-source technologies that was hardly known until this week, said on Friday that it’s launched an investigation after CEO Andy Byron was shown on video at a Coldplay concert in an intimate embrace with the company’s head of human relations.
“The Board of Directors has initiated a formal investigation into this matter and we will have additional details to share very shortly,” the company said in a post on X.
“Our leaders are expected to set the standard in both conduct and accountability,” the company said.
The post comes a day after videos went viral on social media that showed Byron on a big screen at the concert in Boston. Byron, who is married, had his arms around Kristin Cabot, the company’s chief people officer.
Seconds after showing up on the big screen, the pair ducked and hid their faces.
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Byron and Cabot have been put on leave, according to a report Friday from Axios.
Astronomer didn’t immediately respond to a request for comment.
In May, Astronomer announced a $93 million investment round led by Bain Ventures and other investors, including Salesforce Ventures.
The company, which is behind the open-source data operations platform Astro, relocated its headquarters last year to New York from Cincinnati, Ohio.
The price of ether was last higher by 3.6% at $3,558.68, according to Coin Metrics, trading at highs not seen since January.
On Thursday, ETFs tracking the price of ether saw daily inflows top those of bitcoin ETFs for the first time ever. The funds logged $602 million in net inflows, led by BlackRock’s iShares Ethereum Trust (ETHA). Bitcoin ETFs on the same day saw inflows of $522 million. A day earlier, the ETH funds saw a single-day record inflow of $726.7 million.
Stocks tied to crypto trading gained as well. Coinbase rose 4%, hitting an all-time intraday high surpassing its initial pop on its IPO date in 2021, and pacing for its fifth positive week in a row. Robinhood also added 4%. Ether treasury stock Bitmine Immersion continued its rally, jumping 12% Friday.
Meanwhile, the price of bitcoin slipped 1%. Bitcoin treasury giant Strategy, formerly MicroStrategy, fell 4% and Mara Holdings, the mining company and bitcoin proxy, hovered under the flat line.
Ether has advanced 19% this week, bringing its two week gain to about 43.6% — its strongest two-week period since August 2021. Bitcoin is down less than 1% for the week.
“No coin seems to have more [momentum] than Ethereum of late,” Wolfe Research’s Read Harvey said in a note this week. “We began suggesting it was time to start gaining exposure in May, as ETH began to show some life relative to BTC. Fast forward to today, and we’re not just seeing life, but a potential trend reversal.”
Now trading near five-month highs relative to bitcoin, the leadership pendulum in crypto may be shifting, he added.
On Thursday, the House passed a bundle of crypto bills, sending one, the stablecoin legislation known as the GENIUS Act, to President Trump’s desk. It is expected to be sign into law Friday afternoon and become the first ever piece of major crypto legislation in the U.S.
“This is the biggest deal in crypto so far this year, up there with the change in the SEC – it’s the first crypto-focused law in the history of the United States, home to the largest financial market in the world. Just the symbolism alone is worth getting excited about,” said Noelle Acheson, economist and author of the Crypto is Macro Now newsletter.
Being law rather than an agency ruling “means that future Administrations will not be able to easily overturn its provisions. Should any try, by then stablecoins will be so deeply embedded in the global financial landscape, it would be futile,” she added.
House lawmakers also passed a second, much broader crypto market structure bill, the CLARITY Act, that will now go to the Senate.
On Thursday, BlackRock also filed with the SEC to include staking to its ETHA ether ETF, which also boosted sentiment for crypto’s second largest coin.
—With reporting by CNBC’s Nick Wells and Adrian van Hauwermeiren
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