Amazon is pursuing 'too many ideas' and needs to focus on best opportunities, analyst says in letter to Jassy

In its quest to upend everything from wellness attraction and market stores to net satellites, Amazon has go excessively unfocused and is missing retired connected opportunities successful its halfway businesses, according to Bernstein analysts, who connected Wednesday published what they called an "open letter" to CEO Andy Jassy and the board.

Amazon remains ascendant successful e-commerce and unreality computing with Amazon Web Services. In immoderate different areas, however, the institution has spent heavy without seeing the results, the analysts said.

"We afloat enactment Amazon's efforts to uncover and seizure the adjacent AWS-sized opportunity," wrote Bernstein's Mark Shmulik, who has an outperform standing connected the stock. "But what we've seen precocious is simply a institution simply pursuing excessively galore ideas, with weaker ideas taking distant the oxygen, capital, and astir importantly absorption from the genuinely disruptive initiatives that 'only Amazon tin do.'"

Amazon's banal show compared with its "closest mega-cap peers" — Apple, Microsoft and Google — has besides near investors wanting, Shmulik said. Amazon shares are up 50% twelvemonth to date, but they've underperformed apical peers by astir 52% implicit a five-year period, helium said.

The banal was down 3.6% to $122.12 arsenic of aboriginal day New York time.

Shmulik urged Amazon to get backmost to its "Day One" mentality, referring to a operation championed by Amazon laminitis and Executive Chairman Jeff Bezos, who was succeeded by Jassy successful July 2021. Bezos famously said a Day One mentality would assistance Amazon stave disconnected its demise, and described it arsenic continuing to innovate rapidly similar a startup, nary substance however ample the institution becomes.

"Day 2 is stasis," Bezos said in a 2017 shareholder letter. "Followed by irrelevance. Followed by excruciating, achy decline. Followed by death. And that is wherefore it is ever Day 1."

Amazon should "divest, question extracurricular funding, oregon trim spend" successful wellness attraction and its nascent debased Earth orbit outer venture, called Project Kuiper, Shmulik wrote. He pointed to Amazon's multiyear effort to interruption into wellness care, earlier abandoning efforts similar its Care telehealth service, Halo wellness and fittingness band, and a associated health-care task called Haven.

Kuiper "appears adjacent much utmost arsenic an concern area," according to Shmulik, with Amazon committing $10 cardinal to physique retired the initiative. Google's deficiency of occurrence with its Project Loon, Fiber and Fi efforts signals "capital intensive low-margin utilities aren't worthy the effort careless of however 'cool' the exertion whitethorn be," helium wrote.

Amazon should adjacent instrumentality a leafage retired of Alphabet's publication and portion retired Kuiper, wellness attraction and perchance Alexa into "other bets," Shmulik said. Doing so, helium says, would amusement a "far healthier and much profitable halfway business" and wouldn't detract from the company's effort to "build the adjacent AWS."

Shmulik is besides skeptical of Amazon's ongoing efforts to grow successful planetary markets similar Brazil, Singapore and India, wherever contention remains stiff. He calls it a lawsuit of throwing "good wealth aft bad," contempt the strategical worth that those markets whitethorn hold.

When it comes to Whole Foods, Fresh supermarkets and Go cashierless convenience stories, Amazon needs to "make a telephone connected physical grocery," Shmulik wrote. Amazon bought Whole Foods for $13.7 cardinal successful 2017, and has continued to physique retired its market offerings connected its website, portion launching different experimental shops. Recently, the institution paused further enlargement of its Fresh and Go stores arsenic Jassy looks to chopped costs.

Instead of continuing to "tinker with" its Fresh and Go stores, Shmulik said Amazon should "purchase a proven conception specified arsenic imaginable divested KR/ACI stores," referring to the stores Kroger and Albertsons' are selling off arsenic portion of their planned merger.

Amazon should absorption connected its halfway strengths and support pushing into different areas wherever it's gained traction, Shmulik said, encouraging a continued build-out of its advertising and media arms, arsenic good arsenic its Buy With Prime service, which allows websites disconnected of Amazon to instrumentality vantage of its Prime transportation benefits.

The existent scattershot attack is confusing to shareholders and needs to beryllium cleared up to stem continued underperformance, Shmulik added, calling retired uncertainty astir wherever Amazon falls successful the artificial quality race.

"We get capitalist questions contiguous asking 'is AWS successful past spot successful AI?', 'is retail really a profitable business?', and adjacent 'do we privation Andy connected the net call?'" Shmulik wrote. "It points to 1 underlying issue: Amazon doesn't ain its ain narrative."

Amazon didn't instantly respond to a petition for comment.

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