2024-05-29 22:38:33 ET
Summary
- Amazon and Tesla are the only remaining companies in the Magnificent Seven group that do not give dividends or buybacks.
- Amazon is unlikely to start rewarding investors unlike other tech companies, as it can still use the cash flow in many new growth opportunities.
- Amazon is investing heavily in building better logistics, which will give the company a long-term edge in e-commerce and also increase the attraction of its subscription business.
- Amazon is also investing in many other segments, including streaming, cloud, autonomous cars, and international expansion, which should give the stock a better growth trajectory compared to investment in dividends and buybacks.
- In the end, it is unlikely that Jeff Bezos is interested in short-term capital return programs, and he would rather see investment in long-term projects.
Many tech companies have in recent quarters announced major capital returns programs. Some of these announcements have helped the stock sentiment. Investors were hoping that Amazon’s ( AMZN ) (AMZN:CA) management would also announce some kind of dividend or buyback program in recent earnings, but they were left disappointed. Now, only Amazon and Tesla ( TSLA ) are the companies within Magnificent Seven group, which do not give dividends or buybacks. This certainly puts pressure on Amazon’s management. However, there are valid reasons why the management might not start a big capital returns program. In a previous article published in November 2023, " Amazon: Fear of saturated market is overhyped " it was mentioned that Amazon is able to deliver good growth in key segments like subscriptions despite having a big revenue base. This growth has been possible due to massive capital investments in logistics, streaming, international expansion and more....
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Amazon Is Unlikely To Reward Investors With Dividends Or Buybacks, And That Is Good