It’s called the last mile and Amazon.com Inc. (NASDAQ:AMZNC) has invested a lot of money and manpower into squeezing every last second out of the time span between when you click on the “Buy” button and that item arrives at your house or place of business.
Mode is wide-ranging and includes everything from driverless vehicles, drones, airplanes, forklifts, you name it.
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Amazon has assembled a team dedicated to figuring out how to use and leverage autonomous vehicles. Little is known because Amazon won’t comment but it’s believed the group wants to create an army of autonomous transport vehicles to both deliver packages to customers and move large quantities of merchandise between Amazon.com warehouses.
The latter part could come from self-driving semi-trucks traveling frequent routes along the nation’s highways, a problem that might be easier to solve than one involving finding and pin pointing specific addresses when customers place an order.
Amazon Not Alone
Amazon may not create its own fleet of vehicles. It may not have to. Everyone from Alphabet Inc.’s (NASDAQ:GOOGC) Waymo LLC, to General Motors Co. (NYSE:GMC), to Tesla Inc. (NASDAQ:TSLAF) to Uber and others is working at a feverish pace to put self-driving vehicles on the road as soon as possible.
Amazon’s work may be more behind the scenes, technical or it may involve building the vehicles themselves. At this point, thanks to Amazon’s penchant for secrecy nobody knows. What is known is that delivery giants like United Parcel Service Inc. (NYSE:UPSC) and FedEx Corp. (NYSE:FDXC) are on notice that Amazon would eventually like to compete for their business.
Taking On Costco
When it comes to that infamous “last-mile” the ultimate distance is zero – as in ‘walk in the store, pick up the item, walk out.’ To that end Amazon may be about to compete with warehouse club giant Costco Wholesale Corp. (NASDAQ:COSTC). This thanks to a rumor Amazon may be interested in privately owned warehouse club chain, BJ’s Wholesale Club.
BJ’s has just 213 stores, compared to Costco’s 508 so even if Amazon bought the chain there wouldn’t be much competition initially. Analysts, however, point out that should a deal be struck it likely wouldn’t be long before Amazon began a program of adding stores. What’s especially interesting about the Amazon versus Costco angle is the fact both businesses thrive on a membership model. Amazon Prime is similar to Costco annual membership so converting customers would not be a big issue.
Earnings Come Soon
For investors it all comes down to earnings. Amazon.com is scheduled to report Q1 earnings Thursday. Wedbush Securities analyst Michael Pachter recently booster his PT for Amazon to $1,250. That’s the highest among 46 analysts surveyed by FactSet.
Pachter says he expects “substantial earnings growth” and uses that as justification for this higher than normal target. Pachter’s new target, up substantially from his previous $900 target is 39% above Friday’s closing price of $898.53.
Goldman Sachs analyst Heath Terry just raised his Amazon.com price target to $1,100 from $1,000. Terry also cited expectations of revenue acceleration. Amazon stock has jumped 20% to date. The S&P 500 SPX has gained just 4.9% over the same period.