Munster: Amazon Leads In Automated Retail, A $50B Opportunity

Former Wall Street research analyst-turned-venture capitalist Gene Munster said Amazon.com, Inc. AMZN's first-quarter report shows the e-commerce giant continues to flex its "profit muscle."

The Expert

Munster, a managing partner at Loup Ventures, commented on Amazon's quarterly print in a blog post.

The Thesis

Here are Munster's main takeaways from Amazon's Q1 report:

• Profitability exceeded analyst expectations by a factor of two.
• Amazon's strong gross margin should "remind" investors of the company's true potential over time.
• Retail growth of 22 percent was consistent with what was seen over the past two years.
• AWS showed accelerated growth from 45 percent in the prior quarter to 49 percent.
• AWS will remain a "killer platform" that will generate "favorable growth" ahead.
• The Amazon Prime price increase should generate an incremental $2 billion in revenue that will be reinvested in the business.
• Automated retail or self-checkout represents a $50-billion opportunity, and Amazon's Go store concept so far holds the "pole position" in the grocery space, Munster said. 

Amazon's margins are likely to dip lower as the company continues to aggressively expand its fulfillment capabilities, add new content to its platform and lower its AWS pricing, according to Loup Ventures. 

Price Action

Amazon shares were trading up 4.4 percent Friday afternoon at $1,584.76. 

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Photo courtesy of Amazon.