Tag Archives: amzn

Is Amazon Ocean Shipping Worth Millions In Free Cash Flow?

With annual ocean shipping hauling in $350 billion a year in revenue, there is good reason why Amazon.com ( AMZN ) is interested in the business. E-commerce leader Amazon is planning to launch a global shipping and logistics operation that will compete directly with UPS ( UPS ) and FedEx ( FDX ), Bloomberg reported Tuesday, saying it had reviewed documents for the plan, called “Dragon Boat.” Bloomberg wrote that the new operations would expand Fulfillment By Amazon (FBA), which provides storage, packing and shipment of goods from third-party sellers. Such sellers make up a significant portion of its e-tail growth. An ocean shipping business alone could generate substantial returns — more than $100 million in free cash flow, Flexport CEO Ryan Petersen told IBD. That’s assuming the goods would be ingested into FBA’s supply chain — which aims to eventually squeeze out the middlemen, paperwork and headaches from logistics and delivery. The cost savings Amazon expects to see by owning the supply chain end to end, and the charges it could levy third-party sellers (or other merchants) would generate that free cash flow, generally defined as cash generated by operations minus capital expenditures. “It’s attractive for Chinese merchants to get into Fulfillment By Amazon centers right now,” Petersen told IBD. “Even with my conservative model, which would not make Amazon a large freight forwarder (though) less than a fraction of 1% of the overall ocean shipping business, it could easily earn more than $100 million in free cash flow.” Peterson says Amazon’s 90 or so fulfillment centers in the U.S. would easily be able to handle 450 containers every week. (The number of fulfillment centers is from Flexport’s data, Amazon does not disclose that). Based on current shipping costs, that would easily net Amazon $100 million in free cash flow, Petersen says. His estimate also assumes ocean shipping prices dig themselves out of the current slump. Rates are about half of what Petersen expects in the long run. San Francisco-based Flexport provides software and expertise that simplifies the international shipping process. Alibaba, Amazon Competition Grows The Bloomberg story said Amazon’s Dragon Boat program also will pit against its Chinese counterpart Alibaba ( BABA ) to gain share of cross-border e-commerce, which is expected to grow to $2 trillion by 2020. The world’s largest retailer , Wal-Mart ( WMT ), already does something similar when it takes possession of freight in China. But Wal-Mart doesn’t re-sell the freight shipping service, and Amazon might, according to analysts. Wal-Mart did not return requests for comment. Southington, Conn.-based Ocean Audit founder Steve Ferreira agrees with Petersen that ocean shipping could be lucrative for Amazon, and he says the company could well disrupt the shipping market. Ocean Audit specializes in detecting errors in ocean freight billing errors. The fact that Amazon last August filed initial paperwork for what might be the Chinese-side of Amazon’s ocean shipping division, Ferreira told IBD, suggests to him that the company is far along in developing its shipping operations. Amazon Would Be ‘Game Changer’ Ferreira calls Amazon’s potential entry into the ocean freight business a “stunning game changer.” He says the Seattle-based e-commerce firm could “theoretically enter the market and start moving goods at below the current market cost.” Amazon might well be gearing up to do just that. Ferreira says he believes Cong Pan , a Beijing-based Amazon attorney, is getting all the “paperwork” for Amazon Ocean set up. He says Beijing-based Amazon Vice President Brian Xue would run the ocean freight operation. Amazon did not return requests for comment. Amazon CEO Jeff Bezos has often repeated his mantra of putting customers before profits. Additional free cash flow could be used to lower the cost of Amazon’s goods or begin to offer essentially free parcel shipping for shoppers willing to wait, says Peterson. “If I had to read the mind of Jeff Bezos, he might not go after the free cash flow,” Petersen said. Baird analyst Colin Sebastian agrees with Petersen’s assessment. “I would caution that Amazon likes to use projects and other things to subsidize its core business,” Sebastian told IBD. “Amazon might not see any free cash flow because it would be absorbed into other businesses.” Sebastian says  he expects Amazon will move in stages into the transportation and logistics sector. “Amazon takes an incremental approach to new businesses, and they’re not going to create a competitor to DHL right away,” he said. But Sebastian says he sess enormous potential. “There’s a lot of potential disruption,” he said, “if Amazon plays its cards right.”

Amazon.com, T-Mobile Win Tech Ad Contest At Super Bowl 50

Tech companies advertising during Super Bowl 50 on CBS ( CBS ) on Sunday didn’t exactly set the Internet on fire with their commercials. None mustered the buzz of Heinz’s wiener dogs dressed like hot dogs or Mountain Dew’s creepy PuppyMonkeyBaby. Still, a number of tech company commercials were well received by the general public and critics alike. USA Today’s Ad Meter ranked Amazon.com ’s ( AMZN ) star-studded commercial as the top tech company commercial during the big game. Amazon’s first-ever Super Bowl ad featured actors Alec Baldwin and Jason Schwartzman, football great Dan Marino and hip-hop artist Missy Elliott. The e-commerce giant used the comic ad to promote its Echo smart-speaker with Alexa voice controls. The Amazon ad also was listed among the best commercials in post-game articles by the Verge, the Chicago Tribune, BGR and Sports Illustrated’s Extra Mustard blog. Also scoring well in the USA Today audience ranking were T-Mobile ( TMUS ) ads featuring rapper Drake and TV and radio personality Steve Harvey. In one commercial, Drake pokes fun at his hit song “Hotline Bling.” In the other, Harvey makes light of his recent Miss Universe pageant gaffe. T-Mobile had three of the top 10 most shared ads of Super Bowl 50, according to video ad tech company Unruly . (The third was an extended version of the Drake commercial.) Audience measurement company iSpot.tv said the T-Mobile ads earned the highest “digital share of voice” of any tech company ads during Super Bowl 50. The iSpot.tv measurement is based on online views and social media actions. The T-Mobile ads were listed among the big game’s best commercials by the Washington Post, Vox, ESPN, Bleacher Report, TVLine.com, BGR and Sports Illustrated. The top tech ad in terms of social media mentions was LG’s OLED TV commercial starring Liam Neeson, according to Infegy . Coming in second among tech companies was PayPal ’s ( PYPL ) first Super Bowl commercial. However, some critics ranked the LG commercial as among the worst of the night. Chicago Tribune writer Steve Johnson said the warmed-over “Tron” ripoff didn’t make any sense. “Here’s a case of wasting a perfectly good celebrity,” he said. “The TV maker has Liam Neeson speaking ominously to a young guy about ‘the future’ and ‘they want to stop it.’ There is a motorcycle chase, suggesting high stakes. But who, really, wants to ‘stop’ a better kind of TV?” Other tech companies that advertised during the Super Bowl included Apartments.com, Fitbit ( FIT ), Intuit ( INTU ), Squarespace and Wix.com ( WIX ). GoPro ( GPRO ) ran its latest commercial in regional markets, such as Chicago, Los Angeles and New York, during the game, according to Adweek . RELATED: Tech Firms Draft Neeson, Schwarzenegger For Super Bowl 50 Ads .  

Yelp Plunges After Out-Early Report Shows Key Metrics Slowed

Online consumer-review website Yelp ( YELP ) sank on Monday, in a tumultuous market, after posting Q4 earnings that showed a decline in the rate of growth of cumulative review and local ad accounts. Also, its CFO is on his way out. In addition to forecasting full-year 2016 sales growth of about 26% year over year at the midpoint of guidance, Yelp guided adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $90 million to $105 million, up from $69.1 million in 2015. Analysts polled by Thomson Reuters had modeled 2016 adjusted EBITDA of $106.82 million. Yelp stock was down 12% in early afternoon trading in the stock market today , near 16. Yelp stock is down 63% from where it was trading last year and is down nearly 83% from its all-time high of 101.75 brushed in early March 2014. The company’s earnings were released several hours in advance of its scheduled time on Monday due to “a vendor error by PR Newswire.” A conference call with analysts is scheduled for after the close. Growth in three key metrics slowed. Cumulative reviews grew 34% from a year earlier to 95 million, after growing 35% in Q3. Local advertising accounts grew 32% to 111,00 vs. 37% in Q3.  App unique devices, or the number of unique mobile devices accessing Yelp’s apps, grew 38% to 20 million vs. 39% in Q3. Yelp claims that app users “were more than 10 times as engaged as website users based on number of pages viewed.” Diners seated via reservation platform SeatMe rose 120% year over year. Yelp is facing competition in online reviews from multiple fronts — including from Facebook ( FB ), Apple ( AAPL ), Amazon.com ( AMZN ) and Alphabet ( GOOGL )-owned Google — as other websites build or buy their own databases of user-generated reviews to attract viewers. Yelp also competes with online travel agency TripAdvisor ( TRIP ) and Priceline Group ( PCLN ), the world’s largest Web travel-service company. Thomson Reuters noted Yelp’s Q4 EBITDA as coming in light of the consensus analyst estimate: $17.54 million vs. the $21.9 million that analysts had anticipated. Yelp posted Q4 EPS ex items of 11 cents, down 40% year over year. Yelp reported that revenue rose 40% year over year to $153.7 million. That exceeded the $152.35 million that analysts polled by Thomson Reuters had wanted to see. “We are pleased with the progress we made on the key initiatives we set at the beginning of 2015,” said Yelp CEO Jeremy Stoppelman in a statement. “We have evolved to a mobile-centric company and have successfully completed our transition to a performance-based advertising business. In 2016, our priorities are to continue to build our core local advertising business, further increase engagement and awareness and grow transactions. With our rich, relevant review content and highly engaged consumer traffic, we are well-positioned to capture the enormous opportunity ahead of us.” Yelp guided Q1 revenue of $154 million to $157 million, up 31% year over year at the midpoint. Analysts have been expecting $154.4 million. The company announced that its chief financial officer, Rob Krolik, will be stepping down “in the coming months.” The company said it will start looking for a new CFO immediately. Yelp stock opened Monday at 17.08, down 5.6% from Friday’s close. Shares spiked briefly to 18.84 around the time of the midsession earnings release, then quickly dropped to the vicinity of 16. Yelp, LinkedIn ( LNKD ) and others “are trading lower due to Facebook and Google’s competitiveness,” said Chilton Capital Management economist Samuel Rines, in an email to IBD.