While most companies are laying off workers, Amazon (NASDAQ:AMZN) is hiring. Bigly, as President Donald Trump might say.
Senior vice president Dave Clark blogged on March 16 that the company will hire 100,000 warehouse and delivery personnel in the U.S. alone to deal with a flood of orders. The company is giving a short-term raise of $2 an hour to existing workers. Clark wrote the total new investment is $350 million.
The news is expected to lift Amazon’s stock price on March 17, after it fell below $1,700 the day before for the first time in a year. The stock’s all-time high, achieved in February, was almost $2,200 per share. Pre-market trading took back over two-thirds of its nearly $100/share fall during the market rout.
But that price may look dirt cheap if, while other companies take a hit in the current quarter, Amazon’s results show a gain.
The White House sought to downplay reports Amazon CEO Jeff Bezos has been in touch over the pandemic. One reason is that he owns The Washington Post, a frequent Trump critic. Regardless, Amazon’s recent investments in warehouses and delivery vehicles are critical to keeping Americans at home.
Amazon admits some products have gone out of stock and delivery times are extended. It has been policing its extensive network of re-sellers, looking for fake products and price gouging. Some one million products have been taken off the site.
Amazon has also had to release its white-collar workers to their homes. Today, however, The Washington Post reported that some warehouse workers in the U.S. worry their workplaces aren’t safe enough, though Amazon says it’s taking appropriate precautions to protect workers.
Still, hedge funds have never been this bullish on the stock. The five Cloud Czars alone lost $1 trillion in market cap on March 16. Amazon’s market cap alone fell nearly $240 billion. But Amazon was the only one of the five to get most of that back in overnight trading.
Analysts are telling investors to buy Amazon on weakness, but there isn’t much weakness. I personally sold some shares early in the crisis, then bought them back a few weeks later after the stock fell $250/share. That purchase is underwater, but probably not for long.
More Good News
Adding to the gusher of good news, it looks likely that Amazon will get at least part of the military’s JEDI cloud contract. A federal claims judge blocked work on the contract, now held by Microsoft (NASDAQ:MSFT), writing that one of the storage price scenarios used in a military estimate wasn’t “technically feasible.”
Amazon had long been considered the front-runner to win JEDI. It has been running a cloud center for the CIA since 2013. President Trump became personally involved in JEDI, on Microsoft’s side, and Amazon’s lawyers now want him deposed.
Amazon is also setting up a new business selling the features of its cashier-less Amazon Go stores to other merchants. It calls the technology “Just Walk Out” and hopes to make it an industry standard.
Amazon’s success follows a failed effort by Walmart (NYSE:WMT) to deploy Neighborhood Market units with just electronic checkers mid-decade. I visited such a store for TheStreet, finding it dimly lit and slightly frightening. Both Walmart and Target (NYSE:TGT) are talking to Amazon.
The Bottom Line on Amazon Stock
While other companies spent the last decade buying back stock or paying dividends, Amazon spent it deploying capital. It became notorious for printing its cash flow statements first when it reported results. In December 2019 its balance sheet still showed just $23.4 billion in long-term debt, against $225 billion in assets.
Amazon is now getting a pay-off from this investment. It’s not just on the bottom line. The company has become essential infrastructure during the coronavirus outbreak, and it will remain so.
If you have some cash, buy some.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT and AMZN.