AMZN: Drones Don’t Matter for Amazon Stock

But that doesn't mean you should you buying shares

   

AMZN: Drones Don’t Matter for Amazon Stock

Jeff Bezos — along with any Amazon (AMZN) stock investors who believed his drone pipe dream possible — got a rude awakening this week.

amazon stock alibaba ipo 300x199 AMZN: Drones Dont Matter for Amazon Stock
Source: ©iStock.com/killerbayer

That’s because the Federal Aviation Administration (FAA) released a document on Monday forbidding drones from delivering packages.

It didn’t mention AMZN explicitly … but then again, it didn’t really need to.

Instead, the FAA just released a list of activities that are not permitted and “delivering packages to people for a fee” — and added that free shipping still counts, so don’t even try it.

That’s the bad news for Amazon stock … I guess. Really, though, it shouldn’t be news at all, much less bad news — because unless you’re a drone dreamer like Bezos, you probably didn’t think drones were ever going to actually deliver the pretty cardboard boxes you get on your doorstep from the e-commerce site.

And if you did … well, that’s another story.

For further proof, let’s flash back to this headline from InvestorPlace contributor James Brumely, back when the drone madness first began. It read: “Why Amazon Drones Absolutely Won’t Work. Not Even a Little Bit.” In case the headline is too subtle to get the point across for any Amazon stock holders that were optimistic about drones, let’s give a larger snippet:

“That’s right. Amazon feels it’s only a matter of time — and not even much of it — before card-table-sized octocopters will be dropping off purchases right at your doorstep. Once the delivery is made, the drone will fly back to its distribution center to pick up and deliver the next payload.”

He then added:

“Amazon drones are a completely ridiculous and unworkable idea, of course, and will (no pun intended) never get off the ground anytime in our lifetimes.”

It seems the FAA agrees. And it seems that Brumley wasn’t the only one that suspected drones were little more than a dream.

In case you forgot, drone-mania was kickstarted when the Amazon CEO went on 60 Minutes last December and talked through his big plans. It was a great PR stunt — but the drone “plans” were hardly a reason to buy Amazon stock.

And clearly Amazon stock investors weren’t crying over the drone shoot-down. AMZN stock is sitting at roughly the same levels it was at when the announcement hit.

So the bottom line for Amazon stock in the wake of this news? Nothing has really changing from an investment point-of-view.

Of course, that’s hardly any solace considering Amazon stock was grounded long before its drones were. Shares of AMZN have sunk an ugly 18% since the start of the year.

All in all, if you want to be optimistic, the good news is that AMZN stock isn’t a worse investment because of this ruling.

But lately, Amazon — between its usual sky-high P/E and investors’ dwindling patience for its usual lack of profits — hasn’t been looking all that great to begin with.

As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2014/06/amzn-amazon-stock-drones/.

©2014 InvestorPlace Media, LLC

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