Fantasize for a moment about buying groceries without having to wait on a checkout line. Soon, such a luxury won’t be pure fantasy thanks to Amazon.com, Inc. (NASDAQ:AMZN). And when it becomes reality, Amazon stock should benefit.
AMZN announced plans to launch such a scheme in the near future. In fact, it will soon test its first no-checkout grocery store — called Amazon Go — in Seattle, set to open early next year.
Here’s how Amazon Go works: you walk into one of AMZN’s stores, shop for groceries like you normally would and then leave without having to check out. A smartphone app totals your bill for you and charges your Amazon account. Hassle-free grocery shopping, you might call it.
The Wall Street Journal reported earlier this week that AMZN plans to eventually open 2,000 Amazon Go grocery stores, though the company emphatically denied the report. Perhaps Amazon was balking at the 2,000 stores bit, so as not to overpromise. But it wouldn’t be opening one no-checkout grocery store if it didn’t plan to break ground on many more.
Will Amazon Go Make Amazon Stock Go?
And make no mistake: Amazon Go would be groundbreaking. It would essentially revolutionize the grocery store industry (and perhaps the entire brick-and-mortar retail concept) by eliminating the biggest nuisance of grocery shopping in the first place — waiting in long checkout lines.
Emphatic denial aside (and the WSJ said it stands by its report), scattering 2,000 of those no-checkout grocery stores across the country is tantamount to taking the grocery store industry head on, the way Netflix, Inc. (NASDAQ:NFLX) took on Blockbuster.
Mind you, the Amazon Go concept is in its early infancy, and there’s no guarantee it will go national based on one test store in Seattle. Still, the concept is enticing for two reasons: It shows AMZN has plenty of tricks up its sleeve (and leaves one to wonder what other ideas Jeff Bezos has in store), and it presents the possibility of an entirely new revenue stream for a company that already boasts quite a few of them.
Those two factors will likely be in the back of investors’ minds, especially once the Amazon Go store in Seattle opens early next year. Seeing how the no-checkout store works could generate plenty of buzz, and possibly convince investors to jump back onboard Amazon stock after a couple of down months. Since hitting new all-time highs above $844 in early October, AMZN stock has dipped as low as $719, though it has recovered some of those losses, many of which came as the result of a third-quarter earnings miss.
Still, Amazon’s top and bottom lines are trending in the right direction: Sales have grown at least 20% for five straight quarters, while earnings expanded by 219% last quarter.
Amazon Web Services, AMZN’s cloud computing division, has been the biggest growth driver, as the company now owns 31% of the cloud computing market, more than any other company. Its Web Services division grew 58% in the past year, and now accounts for 9.5% of Amazon’s total revenue.
The growth of Amazon Web Services is perhaps the biggest reason why AMZN stock has jumped nearly 100% in the last two years. Perhaps Amazon Go is its next big growth driver.
I doubt AMZN stock will see much of an Amazon Go “pop” just yet, though shares have jumped more than 3.5% since the announcement. But the more we hear about the Amazon Go concept — and particularly once the Seattle store gets closer to launch — it may pique a few more investors’ interests in Amazon stock.
AMZN Is the New AAPL
While investors have grown bored with Apple’s endless parade of iPhones, Amazon.com has managed to keep Wall Street on its toes. In a way, it has taken the mantle from Apple Inc. (NASDAQ:AAPL) as the premier innovator in the eyes of investors. That’s why AMZN stock continues to rise while Apple stock stagnates.
Amazon Go should help keep the momentum going for Amazon stock.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
