Amazon.com, Inc. (NASDAQ:AMZN) is one of the largest companies in the history of the world and one of few worth over $1 trillion. It was founded in 1994 by Jeff Bezos, who served as the company’s CEO for over 25 years before announcing in February 2021 that he’s stepping down.
His departure shocked the investment world and caused a brief dip in the stock’s price, and there are other concerns too. Amazon faces antitrust pressures around the world, and the COVID-19 vaccine rollout signals a return to economic normalcy. This could affect the ecommerce company’s bottom line as consumers return to brick-and-mortar stores.
Still, the company has over 140 million Amazon Prime members in North America alone, and it’s a juggernaut conglomerate. One billionaire observed that Amazon trades at 13x its prime member revenues. In other words, it’s trading at a discount even given its enormous market capitalization.
The company is competing (and arguably winning) against large companies across a broad range of markets, from fulfillment to cloud, grocery, smart home, streaming, and more.
Let’s examine how Bezos’ departure will affect this multi-headed giant.
Bezos Grew Amazon to Be the Biggest Company Ever
When Bezos started Amazon in Bellevue, Washington, it was an online bookstore. But it was clear even then that he had a grander vision to disrupt e-commerce and the world. The company’s 1997 IPO kicked off an expansion that included buying out international online booksellers while expanding its product lines to other consumer goods.
Money continued rolling in, and Bezos knew technology was the key to the company’s sustained longevity. Soon, the foundations of what would later become Amazon Web Services was built. Over time, this transformed the company into a B2B tech services provider and kickstarted the push to cloud-based services.
At the time, Microsoft (MSFT) and Apple (AAPL) were the dominant forces in technology, and hardware was considered a safer investment than software. But Amazon and Alphabet continued pioneering the mobile-first internet we use today. This helped catapult the companies to the top of the most valuable companies in the world list.
But 2021 marks the end of an era.
When Will Bezos Step Down?
Bezos plans to step down as the CEO of Amazon in the third quarter of 2021. The announcement was made as part of the company’s fourth quarter 2020 earnings report, in which the company breezed past analyst expectations.
He explained in his letter to shareholders that he’s excited for the transition. Stepping down as CEO frees him up to work on projects outside Amazon, although he will still remain the company’s executive chair and largest shareholder.
Despite giving a four percent stake in Amazon to ex-wife MacKenzie Scott and selling $3 billion worth of his own shares in late 2020, Bezos retains 10 percent of the company he founded and built from the ground up. However, he’s not leaving the company to just anybody. His successor has been with the company a long time himself.
Who Will Be the Next CEO of Amazon?
Andrew R. Jassy was the CEO of Amazon Web Services since its 2003 creation. By spearheading the creation of AWS, Jassy is responsible for one of Amazon’s more important platforms.
The combination of AWS and advertising revenue kept the company diversified through the 2000s and 2010s to position it as more than just an e-commerce leader. Not only are companies like Walmart (WMT) and eBay (EBAY) battling for SEO visibility against it, but Amazon also hosts some of the most-used services – like Netflix, the CIA, and Spotify (SPOT) – on its AWS servers.
Not only that, but Jassy is also a firm believer in the Bezos’ business philosophy. He was instrumental in boosting Amazon’s bottom line just as Bezos was the driver of top line growth.
Jassy is taking the helm at a difficult time as the company’s size attracts government criticism. Still, Amazon has never been perched better or had a stronger fortress to sustain its growth.
Andy Jassy Leadership Style
What’s on AMZN investors’ minds is whether Jassy will continue following Bezos’ lead or take his own approach. He rose through the ranks over his two-decade career by internalizing the founder’s approach. Now change is on the agenda.
Jassy has an MBA from Harvard Business School and worked closely with Bezos over the past two decades. He led the development of the company’s AWS API and quietly transformed it from an ecommerce site into a services provider.
Both Bezos and Jassy believe that a company should always act like it’s on its first day and continue innovating. Although Amazon top brass does spend time optimizing each business division, it also doesn’t shy away from research and development. This is a key ingredient that catapulted Amazon to where it is today. Going forward, investors should expect the same aggressive disruptive innovation to persist.
Will Amazon Stock Fall When Bezos Leaves?
Amazon has never operated without its founder. But Microsoft continues grow without Bill Gates while Apple flourishes sans Steve Jobs.
When Gates stepped down from Microsoft in 2008, the stock did struggle for a few years. However, the company maintained its growth to match Amazon’s pace through the 2010s and into 2020. Steve Jobs stepped down from Apple three years later, and the company had a similar dip.
However, both share price blips were short-lived, and each of these companies still has trillion dollar market capitalizations. Indeed, their revenue streams and moats present real competition for Amazon on numerous fronts. The transition of power is never easy, but the odds of a material shift post-Bezos are low.
Amazon has always innovated and pivoted into the businesses of the future. While most e-commerce sites have not expanded beyond their original remit to sell products online, Amazon has built a virtual and physical logistics network that branched horizontally and vertically in directions that were unimaginable when it first launched. Expect it to continue doing more of the same.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.