Bezos Steps Down As CEO, What Does This Mean For Amazon ($AMZN)?

Okay, very good morning to you. It is Wednesday, the 3rd of February. Hope you're doing well. Let's get straight to it and talk about this guy here. Jeff Bezos came out last night, bit of a surprise announcement with the Amazon corporate earnings, and said he is going to step aside as the Amazon CEO. So going to talk a little bit about that. What's my view? Why has he done it? What does this mean for the company? How can we expect their share price to perform as you go through the session going forward. And then also to update you on a few other things. Alphabet had really spectacular earnings last night. They're trading up over 7% in aftermarket trade. Mario Draghi confirmed from reports in the Italian press at the weekend that he's tipped to become the new Italian Prime Minister, but a few key obstacles he needs, he needs to hurdle first. Then we've got an update on the Oxford Astra vaccine and the idea about the efficacy rates over 2 dosage shot in terms of some more positive news. And then we've got API inventories, and then just generally the day ahead. So quick look at the overall market sentiment here at the open, and the dollar still holding on to some relative gains that we've been seeing over the last two sessions. So the DXY is up about 0.1%, albeit just off the highs that we printed yesterday. So the major pairs still trading a little heavy. EURUSD here, top left, as I'm speaking, just touching fresh session lows for the moment. Again, technically I'd be keeping an eye just down toward the lows that we've had before. And if we look on the daily chart, you know, we, we do start to bring in some fairly meaningful levels when we start talking about 1.20, which has always been a relative symbolic level for the ECB in terms of their overall perception of euro strength. And in this case, coming back down to that would be a key area of support to have a look at. Yesterday's low that was seen late in the evening amid the kind of short-term dollar strength we've been seeing, that would come in around 1.2027 in the futures. On the upside, top end of the range, a decent area of resistance seen at the pivot, which would also be yesterday afternoon's high at around that 1.2058. So cable just backing off a little bit as well, but these major pairs down only moderately, so about 10 pips. Elsewhere, stock index futures positive again. DAX future knocking on the door of what was the overnight Asia-Pacific session high here in the center left. This comes after positive closes were seen on Wall Street. We closed up 1.4% for the S&P, 1.6% roughly so for the Dow and the NASDAQ 100 last night. This was before then these mega-cap tech earnings came out. Otherwise, elsewhere, T-notes broadly flat, down just a tick. And WTI crude has had an interesting session also, just keeping an eye on the price action here. And generally price is very elevated, as we saw yesterday. We did close above a very meaningful level here from a technical perspective, which was going back to the 20th of Feb of 2020. So 1-year high, more so here for crude. And technically speaking, on the upside, there is a bit of clean air until we get further up, really towards price levels we weren't seeing until the beginning of last year, up at around $56.27. And it comes after some bullish data we had from the API inventories ahead of the DOE's we'll get later on today. But look, let's talk Amazon. Let's get you up to speed and what's going on and the numbers. Let's talk about the numbers for Amazon first because they were pretty spectacular, as have really all of these big tech stocks. Stocks, from Microsoft to Apple to Alphabet and Amazon. You know, they— these companies during this pandemic environment have really taken it to a whole new level. And obviously revenue-wise, breaching this kind of milestone $100 billion figure. So their revenues were $125.56 billion for the quarter, higher than expectations of $119.7 Operating income $6.9 billion. Uh, they see Q1 net sales in a range basically, um, around $106 to $110. Expectations were for just $95.7 billion, so they're very bullish about the future. Their EPS was more than pretty much double consensus, came in at $14.09. And actually watching their share price, um, when the initial news came out about Bezos, their shares were a little bit mixed. I was watching the aftermarket activity and Their shares initially dropped, came back positive, and then they were kind of flatlining. And then the company came out on the conference call and said that COVID expenses in Q1 will drop to $2 billion from $4 billion in Q4, mostly seen due to the fact that warehouses are less busy than what they were during the holiday quarter, which makes sense. So there's less cost implications of PPE and keeping the workers safe in warehouses. And that's quite a— that was a dramatic headwind for the company previously. So that being eliminated out is another net positive as well. And their shares actually moved a little higher in aftermarket trade when that comment came out. But look, let's talk about Bezos and, you know, what is going on, because this wasn't exactly a scheduled announcement. And I guess, you know, when you have these kind of significant companies like this, um, of magnitude and also notoriety in terms of their leadership in the form of their CEO— I mean, Bezos is the guy that was obviously there in his garage selling books back in the '90s and to take it to this, uh, kind of monster-sized company now, obviously there's going to be a little bit of initial interpretation of just apprehension. What does this mean? It's going to lose its real spearhead, its driving force. But, you know, I think any sensible CEO would be aware of this factor, and the transition process would have been smooth. The delegation of responsibility and strategy decision-making would have been spread in order to take away from yourself. You would definitely not want to put yourself in the situation, kind of like what Elon Musk has done, where I think if Elon Musk got run over by a bus tomorrow, I'm afraid Tesla shares would get absolutely decimated. Any other sensible CEO would rather do the complete opposite. Which is, as good as it is to be this PR machine that Musk is, and undoubtedly he's— he is the driving force that's created this phenomenal story that is Tesla. But in terms of longevity, it does create significant risks. You probably saw yesterday, Musk is taking a break from Twitter. We'll see how long that lasts. I think last time he said he was taking a break on Twitter, it lasted literally a couple of days before he had a pop shot at Guess who? Jeff Bezos and Amazon. So don't believe that for a second. Um, but Bezos is going to step aside. He'll transition to the role of executive chair. So this is point 1 that I think is good to understand. Executive chair is still pretty involved, still pretty hands-on. I mean, the difference here from a definition point of view, the CEO's kind of implementation, running of the strategy, ultimate line of responsibility. But the responsibility to the board of directors really lies with the executive chair. And so he would still preside over the company's general stability and so on. And he has said himself that he'll continue to remain quite active in the business. So again, it's not like he's completely removed and off he goes. He still definitely will be there. But overall, who's going to be— I guess the biggest question, who's going to be his replacement? Well, guy called Andy Jassy. And now those who follow the Amazon stock will be very familiar with Andy because he's a long-time, uh, kind of member of the, the Amazon family. He was one of the first kind of more technical assistants that Bezos took on back in the late '90s. I believe he joined the firm in 1997. He is currently and has been the long-time CEO of Amazon Web Services and Amazon's cloud computing business. Now that will be meaningful for many of you because that is really the real dominant growth area of this company, AWS. So it's a very assured, safe, recognized, consistent pair of hands for the company to be moving over to, to Andy Jassy. What has Bezos said in terms of his rationale? He said, as executive chair, I'll still be engaged in important Amazon initiatives. He also will have the time and energy to focus on other things. And the things he noted were Day One Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and many other passions. And actually, that latter one, talking of The Washington Post, that is something which I think is quite meaningful because he has so many other business interests. Some of them, like The Washington Post, start to venture in, into, say, global politics. Bezos was someone who ran and clashed with the previous US President Donald Trump. And if you remember, the US president and administration decided to go with Microsoft for the $10 billion JEDI project with the Pentagon. That was a big blow for Amazon and a big win for Microsoft at the time. And a lot of that being a kind of indirect impact of the fact that obviously Bezos, through his publications, has been quite critical of the administration. He's had similar situations with Amazon's growth in India and existing government and how they've dealt with various domestic issues. So it does make some sense in that respect for him to step away. Um, you know, I guess, you know, when you're one of the world's richest men, what really drives you, motivates you? I mean, making $100 billion is a nice, you know, kind of symbolic thing to leave on, I would say. Um, you know, when someone was to say to you, I know it sounds crazy, but hey Jeff, How do you feel about shooting for $200 billion quarter? I mean, Amazon will print a $200 billion revenue quarter in the future. I have absolutely zero doubt in my mind. But how much of a motivator would that be for someone like, you know, Bezos? It's kind of like that prospect theory curve. The payoff is getting ever lesser the bigger it gets. So I don't think there's much motivation there, whereas things like, you know, the Blue Origin fund, things like that, are significantly behind some of the initiatives being led by Elon Musk. And I think that's the type of stuff that really drives these guys, is competing in these other areas beyond their own kind of core business. In that respect, you know, the guys got divorced recently. That obviously was a big hit, not just financially, I'm sure emotionally as well. So, you know, I can understand lots of different reasons of why this might have taken place. So yeah, that's my overall kind of view on things. Um, I think for the stock price in itself, for Amazon shares, I mean, look, this is what Amazon did overnight, and in fact Amazon pretty much flatlined. So as sensational as the headline sounds, the stock price really so far in aftermarket trade, the initial perception hasn't been a massive negative as what I guess assumptions would have been. Obviously we'll wait for the market open today, see how it performs, but it'll be indicative then of generally that this would be relatively smooth, orderly transition of power. Again, I definitely don't see this as an, as a, as an Elon Musk situation. If this was talking Tesla and he just walked away for whatever reason, this chart would look radically different. But I think the, the strategy from, from Bezos and the transition to Jassy will be a relatively smooth one. The other one after market was Alphabet. You can see here huge jump in their share price in aftermarket trade. So they went up around 7.4%. And extended hours. Their revenue is $56.9 billion, firmer than expected. Operating margins at 28%, operating income $15.65 billion, EPS at $22.30 against $15.58. The— what basically underpinned this phenomenal print of numbers from, from Alphabet was heavy digital advertising spend during the holiday season. As you can imagine, the company really making huge steps forward in, in those figures mainly based on the fact of COVID-19 and that many businesses now are having to pivot away off traditional kind of high street physical retail selling into the online format. And so bringing in new participants as well as those ramping up their budgets to try and tap into this competitive online space when everyone's experiencing restrictions at the moment due to COVID. YouTube ad revenue also jumped nearly 50% as well on the back of that. €6.9 billion against expectations of €6.2 billion. So that's your kind of earnings summary. A quick look elsewhere. He's back. Yeah, Mario Draghi, Super Mario, back in the hot seat. We've talked about this a lot in my notes on Sunday, in our briefing on Monday, so it's not the most unexpected news. But yeah, Italy's president has asked Mario Draghi, the former ECB president, to come back and begin talks to form or look to form a new Italian government. Overall take here is that, you know, the guy has a nickname of Super Mario for one clear reason. He's, you know, he used to throw everything in the kitchen sink during the sovereign crisis and when he was steering the ship at the ECB. He is an extremely smooth operator, incredibly well experienced. He's very well respected in markets. He is a very safe pair of hands, particularly in a situation as unstable as the Italian political environment at the moment. So a technocrat government could well be the solution that's needed, really, given the disharmony and the, the kind of split and fragmentation of Italian politics at the moment. However, it's definitely not going to be absolutely plain sailing because there is a few things here The senior politician in Italy's Five Star Movement has said already that they would not support a Draghi-led government. And some of the things I was reading this morning in the Politico were suggesting then that that's difficult because then he needs to create numbers from somewhere, and that might either come from either the PD or the Forza Italia. So he's got to look to bring in some of these other parties, which could then bring a degree of apprehension amongst existing other coalition members who might not want to participate in a government sharing power in such a way. So yeah, definitely to keep an eye on. I'd be interested to see— well, actually, let's have a look at BTPs. I mean, look at the reaction in BTPs this morning. Big, big pop, gap up in BTPs, Italian bond futures here. So you can see yields just sinking on the back of Draghi being more formally tipped now as potentially the next Italian PM if he can club together this government. So the idea here being then is that this is the market saying that, you know, they would love Draghi to bring a little bit of an adult in the room, restore a bit of calmness and order into the Italian system at the moment and what otherwise has been a degree of political instability. Okay, elsewhere, um, just want to have a quick word on this Oxford-Astra study. Um, yeah, another good news actually for the UK. I mean, the UK has done a pretty phenomenal job, of course, of getting up and running. And, you know, they were administering almost 600,000 doses in one day just a few days ago. So they continue to close in on this mid-February target I must say that it doesn't mean though that they're going to loosen restrictions at that point in time. You know, lots of conversation at the moment about new variants on the variants, if you like, whether it be in the UK or elsewhere. And so, you know, the virus is mutating as viruses do, and this does pose then considerable risk then to a new transmission of the virus and also then the effectiveness of the vaccines in themselves. So Definitely it's not just about hitting target and it's game over. This thing is going to be very long and protracted in my view in terms of the reopening of any of these economies from fairly stringent lockdowns. But the vaccine update here that's positive is a single dose of the Oxford-Astra coronavirus vaccine is 75% effective from 3 weeks to 12 weeks after the injection according to analysis of trial data. And then the vaccine efficacy rose to 82.4% following a second dose administered then at the 12-week marker. So this is very important because the UK, remember a few weeks ago, took the strategy approach rather than just administering dose 1, come back, dose 2, move on, next person please. What they've gone down to was the efficacy rate is strong enough to buy us time to administer as many people as possible in a 12— up to 12-week period, and then we'll start administering the second shots. And this data would suggest then that that was a very good decision that the UK government has made, and in order to then ramp up and get as many people inoculated as possible, which is going to be obviously very productive in trying to contain the virus and its transmission at this point. Otherwise, elsewhere, WTI crude obviously moved to a 1-year high, uh, yesterday. Uh, we briefly looked at the chart. There's some really interesting levels on the upside which could open bit of a door to a further push, particularly under this type of vaccine news. Equities, you know, NASDAQ's just a whisker off session high or all-time highs again. The S&P's fully recovered last Wednesday's sell-off on that kind of reported liquidation of some of the hedge fund positions in these short squeeze stocks. That ship has sailed, if you like. GME, GameStop, they got hammered again yesterday, all of those companies pretty much getting crushed. And silver's backed off more than closed the gap, and we're trading down below $27 in silver futures this morning. So that ship has sailed now as far as markets are concerned. But in terms of the APIs last night, head of the DOE later, a bullish figure, which is only going to help the kind of oil picture at the moment with the technical moves above what we saw yesterday, meaningful levels on the longer term. Charts. The headline draw was 4.261 million, almost more than double consensus. Cushing draw 1.885 million, gasoline draw 240,000. So we'll be looking at those numbers as reference points for later on today. Then as far as the, the session is concerned, we've had some Chinese data overnight. Isn't really, um, that important to be honest, albeit their service PMI at 52 against expectations of 55.5, which was the lowest since April of 2020. But nonetheless, the market's just not, not that focused on those figures at the moment, and obviously still above the key expansionary level of 50 for the time being. You've got the service PMIs coming out this morning. These are all final readings, so unlikely to be market moving. But what will be of interest is the HICP flash reading, so inflation figures coming out of the eurozone at 10 o'clock. Worth watching if you're looking at things like the euro currency. Then this afternoon, ISM Services PMI. You've got ADP National Employment as well. So, you know, some of these jobs-related figures or constituents in ISM will be key as to then form our idea of what the labor report will look like from the US government department on Friday in Non-Farm. DOE's 3:30. And speaker-wise, you've got a lot of Fed speakers actually today, but they don't really kick off until US trading hours. With 130, Fed's Kashkari. You've got Bullard, Harker, Mester, Evans. But between Kashkari and Mester, you've pretty much got the absolute full spectrum of FOMC perspective, from dovish Kashkari to hawkish Mester. So it'll be interesting to see what they've got to say. I must stress though that only one of these 5 Fed speakers are voters, and that being Fed's Evans. Who's the last one up on the docket and doesn't speak until aftermarket. Just a point of note. Earnings-wise today, um, what have we got? Well, from the US, pre-market, a couple of interesting smaller names perhaps on a single stock basis— Spotify, Biogen. Aftermarket, Qualcomm, eBay. But no one I'd say impactful from an index trading perspective. All right, that is it. Gonna let you get on with the day. Any questions at all, feel free to drop me a comment and happy to help. All right, thanks guys, have a good day.