Amazon.com Inc. is investing heavily in automation, cloud infrastructure, and a logistics network in order to consolidate its lead in the ecommerce industry. The firm has been trying to find ways to reduce its shipping expenses and it has been investing in its own delivery systems. Analysts think its stock will get a boost when the logistics and delivery system is fully operational.
Amazon has maintained that it is not planning to replace shipping firms such as FedEX and UPS with its in-house delivery system. The firm noted that “we are very happy to have the delivery capacity our carrier partners can provide. They provide a high quality service, and our own delivery efforts are needed to supplement that capacity rather than replace it.” Nonetheless, it is obvious that the firm’s ambition is to deliver goods directly to customers.
Analysts think in-house logistics could push Amazon could touch $1000 per share
Amazon is currently trading around an all-time high of $830 per share after it crossed the $800 milestone last week. The stock has been on a predominantly bullish ascent this year and it sports year-to-date gains of 22.61%. The shares of the ecommerce giant has more than doubled in less than two years after the stock crossed the $400 milestone in April 2015. Interestingly, analysts are vocal about their bullish outlook on the stock going forward.
A couple of weeks ago, Ken Sena, an analyst at Evercore ISI wrote a note titled AMZN – An Automated Vision of the Future.” In the note, Sena observed that the firm’s investment in cloud and automation could unlock more upside potential. He noted that “Not only are these advancements leading to higher overall customer satisfaction as delivery of food, packages, or other is becoming faster and more reliable, but we also see where many of the automation technologies are already offering quantifiable financial benefits,”
Two days ago, analyst Doug Anmuth of JPMorgan raised his price target on Amazon from $925 to $1000 by December 2017. The analyst gives the stock a 20.5%upside potential ahead. The analyst notes that “we believe Amazon continues to show strong ability to take share of overall eCommerce, and its flexibility in pushing first-party versus third-party inventory is a major advantage compared with other retailers.”
Craig Johnson, a technical research analyst at Piper Jaffray also noted that the technical signals support a bullish ascent in Amazon. In a research note published on Tuesday, Johnson noted that the stock could soon touch $900 because “The chart has been a terrific trending stock over the last several years… And at this point in time you can see a very well-defined channel that the shares have been in.”
Amazon’s investments in logistics and automation could trigger a bear cycle
Many analysts agree that Amazon ‘s investment in, logistics, automation and cloud could lift the business to greater heights; yet, other analysts have opined that the huge capital expenditures could trigger a bear cycle in the stock. Larry McDonald of ACG Analytics thinks that investors should not join the bullish bandwagon to buy Amazon.
McDonanld, while speaking on CNBC’s “Trading Nation” noted that Amazon’s heavy spending on logistics and cloud systems could weaken the bottom line in the next couple of months. In his words, “just because other people are making money in tech doesn’t mean you have to chase. Sit in the boat, wait for fear over the next 6 to 9 months, and you will get a chance to buy Amazon.”
Victor Alagbe owned no shares of Amazon.com Inc. stock at time of writing, but positions can change at any time.
Disclaimer: The above should not be considered or construed as individualized or specific investment advice. Do your own research and consult a professional, if necessary, before making investment decisions.