AMZN Stock Could Post Gains in 2016
E-retailer Amazon.com, Inc. (NASDAQ:AMZN) is working left and right to drive out any and all competition to claim dominance over the retail industry. AMZN stock, meanwhile, is quietly making its way to a four-digit value. Here’s why I believe the stock will continue to soar through 2016.
Amazon has recently purchased a whole fleet of trucks in an attempt to step up its delivery services. Seemingly, the company is planning to take the delivery companies out of the equation by forming its own brand of delivery service under “Amazon Prime.” At the same time, the move will bolster its position in the physical retail business. (Source: “Amazon Buys Thousands of Its Own Truck Trailers as Its Transportation Ambitions Grow,” Re/Code, December 4, 2015.)
Imagine, if you ran out of eggs, milk, or toilet paper. You’d likely make a run to the closest Walmart to stock up or make a quick stop just for what you really needed. But what if Amazon delivered it all to your doorstep within an hour? Wouldn’t driving all the way down to the store, waiting in a long queue, and spending all that gas and time to pick up one item seem counterintuitive and pointless when there’s a better alternative?
Amazon’s Prime service currently provides its members a two-day delivery service for an annual fee, in addition to a number of other services like online streaming and photo storage. In addition, under the company’s “Prime Now” service, which has been active for some time now in selected markets, Amazon delivers a catalogue of selected products within an hour’s time for a nominal extra charge, though the charge is waived if the delivery time is extended from an hour to two or more. An extension of this service is “Amazon Fresh,” which delivers perishable goods like groceries to your doorstep.
So far, the Prime Now services are only available in 24 or so big cities, but it will certainly be expanded to all over the country as the company continues to expand its warehouses and trucking.
Separately, the company is also working on its drone delivery service, called “Prime Air.” The drone delivery dream is finally coming true, as the Federal Aviation Administration (FAA) has approved flying drones in residential areas. With an arsenal of both trucks and drones, the company will be able to reach out to customers in both urban and suburban areas.
Brick-and-mortar retailers, like Target and Walmart, are already feeling the heat from Amazon’s aggressive expansion strategies and might have finally come to terms with the fact that e-commerce is no longer “just a niche.” Physical stores are now starting to offer online retail options to grapple on to their slipping market share. Amazon, on the other hand, is fast making its way into the physical world to drive away all of its competition.
The Bottom Line on AMZN Stock
To some, this new venture into the logistics business could seem to be a little risky and off from the company’s fundamental e-commerce model, but clearly, Amazon is redefining itself. If Amazon hits the mark, this could eventually end up becoming a new business segment for this technology and services behemoth.
Ultimately, Amazon is right on track to pushing Walmart from the top spot on the leaderboard in the brick-and-mortar industry, where the latter has long enjoyed dominance. Consequently, AMZN stock is poised for promising gains in the coming year.