Amazon.com, Inc. (AMZN) is coming off a blowout third-quarter earnings report; Q3 results beat both top- and bottom-line estimates, and the robust growth of its cloud computing division, Amazon Web Services, helped the company post its second consecutive surprise profit.
AMZN stock is up about 8% since that report, and the stock trades within earshot of all-time highs. The company is worth more than $280 billion. AMZN competes in almost every tech industry you can think of, and goes head to head against industry titans such as Alphabet (GOOG, GOOGL), Apple (AAPL), IBM (IBM), and Walmart (WMT).
Despite beginning the year with a market cap around $140 billion, AMZN stock is now the second-best performer in the entire S&P 500 index, up 96% and second only to another one of its rivals, Netflix (NFLX), whose stock is up about 110%.
And yet, Amazon’s greatest market opportunity might be just starting to materialize.
Is AMZN Building Its Own UPS?
Would it actually surprise anyone if AMZN CEO Jeff Bezos, overflowing ambition and innovation, decided to uproot UPS (UPS) and FedEx (FDX) entirely and develop his own global delivery and transportation network?
I for one, would not be shocked — merely in awe. Bezos has shown time and again he’s not afraid to lead AMZN into new, untested waters. From an online bookstore, Amazon morphed into an online retailer of everything; the company began making tablets, e-readers, and phones, developed its own video streaming platform with award-winning original content, built the leading enterprise cloud computing resource…the list is exhausting.
According to an exclusive piece by DCVelocity, a multimedia magazine covering logistics and supply chain management, AMZN is planning to announce a global shipping network sometime in 2016. Quoting “a person familiar with its strategy,” the report says that, according to the source,
“…Amazon will do ‘whatever it takes to serve every community’ in the United States. The online retailer and fulfillment provider’s objective is to guarantee delivery within a 90-minute-to-two-hour window…”
Judging by a recently-posted position on Amazon’s job website for the position, “Sr Manager, Amazon Global Fulfillment Delivery Experience,” it would appear the company is aiming to build a global delivery network, not merely a domestic one.
Having its own delivery network would make AMZN more vertically integrated, to be sure. No aspect of the customer experience would be out of its control; no longer would Amazon need to occasionally rely on the notorious inefficiency of the USPS.
But perhaps the biggest opportunity for AMZN would be revenue from third-party vendors using Amazon’s expansive delivery network. Colin Sebastian of Baird has said this could represent a $400 billion-$450 billion opportunity for the company.
Obviously, an endeavor of this magnitude won’t happen overnight, but it appears that AMZN is giving it a shot.
And, I’m not going to bet against it.
As of this writing, John Divine was long AMZN stock, and AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
