3 Reasons Jeff Bezos Should NOT Return as Amazon CEO

Michael Batnick is the director of research for New York City-based Ritholtz Wealth Management. He’s also very good at making predictions about the markets. 

At the beginning of 2022, Batnick predicted that the S&P 500 would fall by 15%, delivering its worst annual performance since 2008. While he was off by more than four percentage points, it was an impressive call. 

To begin 2023, he’s made another 10 predictions. One of them is that Jeff Bezos will return to Amazon (AMZN) as CEO, replacing Andy Jassy, the person he handpicked to succeed him less than two years ago. 

Like Bob Iger, it seems you can go back home.

However, here are three reasons that would be a mistake.  

Andy Jassy Was Largely Responsible for Amazon's Profits

Amazon officially announced Jeff Bezos would step down as the company’s CEO in February 2021 to be replaced by Andy Sassy, the head of its AWS (Amazon Web Services) unit. Jassy officially became CEO on July 5, 2021, with Bezos moving up to his new role as Executive Chairman. 

Both men remain in those positions 18 months after officially making the transition. Since the move, Amazon stock has lost about 52% of its value. That compares to a 12% decline for the S&P 500.

It would be easy to suggest that returning Bezos to the top job would boost the company’s share price, but the reality is that Bezos has been along for the ride these last 18 months. It’s hard to imagine that the founder and Amazon’s largest shareholder have been completely silent during this period. 

And let’s not forget that Jassy is responsible for building AWS, the company’s profit machine. Founded in 2004, Jassy was Senior Vice President of AWS from April 2006 through April 2016, when he became AWS CEO, a position he held until July 2021, when he replaced Bezos as chief executive. 

In the most recent quarter, AWS generated an operating income of $6.52 billion, 57% higher than a year earlier, on $18.44 billion in revenue. However, the rest of the business lost close to $3 billion on $98 billion in revenue. 

If not for Jassy’s work at AWS, Amazon wouldn’t have stood a chance. 

Jassy Deserves More Time

Forget for a moment that Jassy hasn’t been a loyal Amazon employee since 1997 and a major cog in Amazon’s wheel. There’s the reality that new CEOs take time to grow into their roles. 

The Harvard Business Review magazine’s November/December 2019 issue discussed The CEO Life Cycle as part of its 2019 list of best-performing CEOs. Several comments stand out in the authors’ findings. 

For example, they asked CEOs about the ideal tenure in years. The answer was 9.5, about one-third the time Bezos held the role and far less than Jassy’s current tenure. 

Secondly, the authors point out that Year 2 of a CEO's tenure is often met with a sophomore slump after experiencing a first-year honeymoon. With its stock down considerably since its August 2022 high of around $145, it’s clear that the sophomore slump has taken hold. 

Interestingly, their findings suggest that CEOs who experience deep sophomore slumps in year two often are cut loose in later years, so Batnick’s prediction isn’t entirely off base. Nevertheless, there’s no question that 2023 is essential to Jassy’s long-term success.

However, in years 3 to 5, CEOs enter a period of “favorable tailwinds.”

“CEOs in this stage are working hard for the future. By now their imprint is all over the organization: The strategic direction is set, the organizational culture continues to evolve, and positive board dynamics have been established,” the HBR article states. 

You can argue that Jassy's imprint is already all over the organization, so there shouldn’t be the same 3-5-year grace period that CEOs new to an organization might get. 

On the other hand, Jassy’s domain over AWS was a much smaller piece of the Amazon pie, which means he probably didn’t have nearly the advantage over an outsider one might think.   

Either way, 18 months isn’t enough time. 

There Are Reasons Amazon Stock Is Underperforming

There were several cracks in Amazon’s armor in 2022. 

First, it reported an operating income of $3.67 billion in Q1 2022, well shy of the analyst estimate of $5.32 billion. That led to its largest single-day decline since October 2011. As a result, investors began to contemplate a world in which Amazon was less than perfect. 

The same happened in October when it reported Q3 2022 results that were better than expected but worse than fourth-quarter analyst estimates. Analysts project $155.1 billion in revenue, while the company’s revenue estimate is $148 billion at the high end of its outlook.

And in November, Amazon announced as many as 10,000 job cuts across several different areas of its business. Considering Amazon has been one of America’s biggest job creators over the past decade, this was a gut punch for investors. 

However, it’s not as if Jassy is sitting around whining about the end of a Covid-related e-commerce surge that happened in 2020 and 2021. On the contrary, it’s got plenty of projects on the go that will deliver future revenue streams. 

One of those is health care. In July 2022, it paid $3.9 billion for One Medical, a membership-based primary care provider that uses technology to transform the healthcare experience. It has more than 8,000 businesses providing health benefits to their employees. 

Amazon continues to disrupt different areas of the economy. But, unfortunately, these big ideas haven’t yet translated into profits. After 2022’s terrible year in the markets, investors are more concerned about consistent profits, something Amazon’s never been concerned about. 

To bring back Jeff Bezos as CEO sends a message to the street that Amazon’s broken. I don’t see that being the case here. It also wouldn’t hurt if the threat of a recession were in the rearview mirror. 

Patience is the only way out of its stock’s current mediocrity. Andy Jassy is no Bob Chapek. 

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