Following a record US$32 billion in free cash flow last year, Amazon is expected to nearly double that figure in 2024, according to data compiled by Bloomberg.
By the end of 2023, Amazon had more than US$86 billion in cash.
Typically, Amazon reinvests cash back into its business, though it did buyback US$10 billion of shares in 2022.
But its Big Tech peers have far outshined Amazon on this front – Alphabet repurchased more than US$60 billion last year, while Meta also undertook a US$20 billion buyback.
Even though Amazon hasn’t undertaken as large buybacks as its peers, it doesn’t seem to have dampened investor appetite for its stock. Its share price has already climbed approximately 21 per cent this year. Also, unlike Microsoft and Meta, Amazon has yet to cross its 2021 market peak which makes investors all the more bullish about its trajectory.
There are limitations to what Amazon can do with the cash, especially as Big Tech is coming under a bigger spotlight than ever before. “This suggests not only rising share buybacks, but a more aggressive capital return policy that could include a dividend. If returns don’t increase, cash balances could soar above US$100 billion later this year,” said Robert Schiffman, a senior credit analyst at Bloomberg Intelligence.
Market sentiment as to Amazon’s inclination to buyback shares is buoyed as the company finds its rhythm under Andy Jassy who took over as CEO from Jeff Bezos in 2021.
Amazon will report its first-quarter earnings later this month.
