Is This a Real Tailwind for Amazon Stock (AMZN Stock)?
Amazon.com, Inc. (NASDAQ:AMZN) just took its drone delivery scheme to a whole new level of surreal. Instead of launching delivery drones from ground facilities, the company wants to have blimps that act as “airborne fulfillment centers.” Is this a crazy idea or something that could send Amazon stock (AMZN stock) barreling past $1,000.00 per share?
For those who may not know, Amazon has already shipped some packages using unmanned drones. Granted, it only used the system for a handful of deliveries, but it showed skeptics that Amazon is dead serious about drone deliveries. It isn’t just a publicity stunt to boost AMZN stock.
Amazon is currently working with regulatory agencies to make sure that drone deliveries are safe, and that they comply with existing laws. But the biggest indication of Amazon’s commitment was a new patent filed on December 22. Based on the detailed schematics in the patent filing, it seems that Amazon has put a lot of brainpower behind the drone program.
As such, we should consider its implications for Amazon stock. The “last mile” of delivery is tremendously expensive for e-commerce retailers like Amazon, so cutting out the human labor element could result in massive savings. Just take a look at the proposed changes:
Described is an airborne fulfillment center (“AFC”) and the use of unmanned aerial vehicles (‘UAV’) to deliver items from the AFC to users. For example, the AFC may be an airship that remains at a high altitude (e.g., 45,000 feet) and UAVs with ordered items may be deployed from the AFC to deliver ordered items to user designated delivery locations.
(Source: “Amazon is considering using blimps as huge airborne warehouses,” Business Insider, December 29, 2016.)
In plain English, this means that Amazon wants to save on fuel costs. The idea is to have the airship hover in the sky while little drones float down to deliver packages. Since the drones are starting from a high altitude, they don’t need to waste as much energy fighting gravity.
Here’s a sketch of what the plan would look like in action:
Chart courtesy of United States Patent and Trademark Office
While this idea may seem far-fetched at first, it isn’t impossible. Amazon could completely revolutionize the delivery business, just like it did for the book business and the retail business.
You certainly can’t fault CEO Jeff Bezos for a lack of ambition. It is perfectly achievable for Amazon stock to break the $1,000.00 level over the medium term, but I remain reluctant to boost my short-term price target for AMZN stock.