Financial Advisors Pay Closer Attention to Amazon.com, Inc. (NASDAQ:AMZN) as It Plans Parcel Delivery Business
The US stock market had a wild ride last week, which ended with all three main indexes losing over 5% and erasing all the gains recorded since the beginning of the year. On Monday, February 5, stocks extended their sell-off for the second day, with Dow Jones entering correction territory and S&P 500 recording the worst day in six years. On Tuesday, stocks gained some ground back as some investors rushed to buy the dip, but in intraday trading on Wednesday, Dow Jones and S&P 500 recorded their biggest reversals since August 2015 and February 2016, respectively, as they started to decline in the afternoon following an increase in 10-year Treasury yields. Thursday resulted in Dow Jones dropping by 1,000 points and entering correction territory as it lost over 10% from its record highs and S&P 500 lost 3.75%, broking below 100-day moving average and closing below 2,600 points. Both Indexes posted modest gains on Friday, February 9, which pared some of the losses, but Dow Jones still had its worst week in two years. In this way, the Dow Jones Industrial Average and S&P 500 lost 5.21% and 5.16%, respectively, while tech-laden Nasdaq Composite slid by 5.06% between February 5 and February 9.
Among the developments that spooked investors last week were the massive government spending bill that was signed into law on Friday, ending a brief government shutdown. Positive economic data, such as a drop in weekly jobless claims to a 45-year low, sent yields higher, which in turn aided the sell-off. Moreover, oil prices slid for the sixth day on Friday and registered their worst weekly decline in two years, which sent oil stocks lower. Nevertheless, despite the turmoil in US and overseas markets, many analysts believe that the volatility is temporary and there are no signs of a recession on the horizon.
At the same time, the fourth-quarter earnings season is ongoing and by February 9, 68% of the S&P 500 companies reported their results, which were mostly positive, according to FactSet. Among the companies that have reported their results, 74% posted better-than-expected EPS and 79% recorded revenue surprises.
Many individual companies were in the spotlight last week as well, both in connection with their financial results, as well as other developments. Financial Advisors’ were keeping an eye on Apple Inc. (NASDAQ:AAPL) and Freeport-McMoRan Inc. (NYSE:FCX) last week. According to TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, Apple Inc. (NASDAQ:AAPL) and Freeport McMoRan Inc. (NYSE:FCX) ranked as the top most-searched tickers between February 4 and February 10, as the former had reported its financial results the previous week and last week investors continued to digest the results and other news, such as The Wall Street Journal’s reports that Goldman Sachs is in talks with Apple Inc. (NASDAQ:AAPL) to finance iPhone purchases and that Apple Music is on pace to overtake Spotify in terms of subscribers. Freeport McMoRan Inc. (NYSE:FCX) made headlines last week after the company reinstated its dividend of $0.05 per share to replace the one it cancelled in 2015 due to a drop in commodity prices.
Amazon.com, Inc. (NASDAQ:AMZN) ranked as the third most-searched ticker last week on the back of several developments. The eCommerce giant posted its results on February 1, managing to beat both EPS and sales estimates and its AWS cloud segment showed a big revenue growth. Last week, Amazon.com, Inc. (NASDAQ:AMZN) remained in the headlines, as, on Monday, Feb. 9, FT reported that China’s JD.com Inc (ADR) (NASDAQ:JD) plans to enter the European market next year. The same day, preliminary IDC data showed that Amazon.com, Inc. (NASDAQ:AMZN) had the largest gain in tablet market share in 2017, expanding to 15.6% from 9.6% in 2016. On Thursday, the retail giant announced the integration of groceries into its Prime Now service, which will allow Prime members to order groceries for delivery within one or two hours. On Friday, Reuters reported that Amazon.com, Inc. (NASDAQ:AMZN) plans to lease a mega-warehouse in Brazil, which would quadruple its operations in the country.
However, the biggest news concerning Amazon.com, Inc. (NASDAQ:AMZN) last week was its push into the parcel delivery business. Multiple reports, including from The New York Times and The Wall Street Journal, said that Amazon.com, Inc. (NASDAQ:AMZN) plans to test a delivery service this year, starting in Los Angeles and then spreading to other US cities. The service, called “Shipping with Amazon”, would involve company couriers picking up goods from third-party sellers and then delivering them to Amazon warehouses, from where they would be delivered to customers. Currently, the delivery from third-parties is done by established delivery services such as United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX). According to NYT, the initial trial will involve delivery companies shipping orders from Amazon warehouses to customers, but eventually, if the test goes well, the company could bypass delivery services completely.
While the news sent the stocks of United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX) lower, it’s unlikely that Amazon.com, Inc. (NASDAQ:AMZN)’s own delivery service will disrupt established companies any time soon. The eCommerce giant has been getting more involved in shipping for a while now and it certainly has the means to enter this capital-intensive business. It operates cargo jets and semi-trucks and last year it started handling the container-shipment of goods from China to the US. However, at the same time, Amazon.com, Inc. (NASDAQ:AMZN) continues to rely heavily on outside shipping companies and its business with carriers is growing. Launching its own delivery service will help Amazon.com, Inc. (NASDAQ:AMZN) in periods of high demand, such as the holidays. In addition, being able to handle its own shipping could allow Amazon to negotiate better prices with other carriers.