Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Amazon (AMZN) Continues Diversifying; J.P. Morgan Bullish on the Stock


At its core, Amazon (AMZN) is an online retailer. But dig a little deeper, and the company is so much more. And if news reports are true, the company is continuing to expand its reach even further.

Amazon is looking into buying Chinese truck startup TuSimple, which aims to be the first to bring an autonomous truck to the market. Amazon continues to invest heavily in its logistics network, including its lineup of trucks and planes, as well most recently its new air hub in Cincinnati, as the company continues to look to decrease its dependence on third-party shipping companies, including UPS and FedEx.

Though unconfirmed, analyst Ravi Shanker of J.P. Morgan said this would be a “a logical extension of [Amazon’s] recent trucking/logistics initiatives,” as the company continues to show it is laying the groundwork to become a “logistics giant” in the coming years. The analyst also believes this “a logical extension of [Amazon’s] recent investments in transportation tech OEMs/suppliers,” including a recent $700 million investment in Rivian and $530 million investment in autonomous tech supplier Aurora.

Shanker is quite bullish on AMZN as he rates the stock an Overweight with $2,100 price target, which implies nearly 14% upside from current levels. (To watch Shanker’s track record, click here)

Amazon is the largest e-commerce company in the world, and continues to fight against Microsoft and Apple as world’s most valuable company. Its efforts in e-commerce, however, has been fueled by its success in its other segments, most notably its Web Services (AWS) division. AWS continues to generate significant profit, which is used to help finance new features in e-commerce.

But as e-commerce gains in popularity, Amazon is faced with increased expenses from shipping companies. While Amazon is expanding its own shipping network, it still relies heavily on the likes of the postal service, UPS and FedEx, as well as a host of other third-parties, to deliver its orders. Increased investment in its logistics network is Amazon’s attempt to rid itself from needing to work with the aforementioned shipping companies.

“We believe AMZN’s series of investments/initiatives in both “old world”and “new world”areas of transportation and logistics indicate that this is not just a science project for AMZN, but a real focus area for growth and cost savings. We believe the entire transportation space should prepare for a future where AMZN and other giant shippers are potentially competitors as well. The large amount of capital being funneled into the new digital disruptors in the areas of autonomous driving, electrification, last-mile and digital brokerage services have the potential to accelerate the commercialization of those technologies as well,” Shanker noted.

All in all, Wall Street doesn’t need to look to the autonomous future to invest in Amazon. TipRanks analysis of 34 analyst ratings on the stock shows a Strong Buy consensus, with all 34 analysts recommending Buy. The average price target among these analysts stand at $2,226.88, which implies nearly 20% upside from current levels. (See AMZN’s price targets and analyst ratings on TipRanks)

 

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