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How Promising is Amazon's Move to Autonomous Ride Hailing?

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The pandemic may have proven to be a challenge for businesses around the world, but ecommerce giant, Inc. (AMZN - Free Report) has taken this opportunity to offer its vast base of customers more than just its pandemic-ready services. From curbside pickup, unlimited one- and two-day shipping, same-day delivery to no-contact deliveries, Amazon is ensuring its customer pool keeps growing. However, these aren’t the only tricks up the company’s sleeves.

Recently, reports surfaced of Amazon gearing up to purchase self-driving start-up Zoox for more than $1.2 billion. While the general assumption was that the company was looking into automating its delivery service, Amazon applauded Zoox for its ride-hailing goals. Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Of course, with the rising trend of self-driving and autonomous vehicles, it’s not overly surprising for Amazon to go down that path. According to, the global advanced driver-assistance systems market size is projected to grow from $27.0 billion in 2020 to $83.0 billion by 2030, at a CAGR of 11.9%, GlobeNewswire cited. But that’s not all what Zoox is about.

Zoox is Not Your Average Self-Driving Start-Up, Here’s Why

The company may not be famous in the arena of autonomous driving technology, but that doesn’t hold it back from putting its efforts into developing a completely autonomous vehicle. In fact, Zoox is developing autonomous driving from the scratch, incorporating a purpose-built "symmetrical, bidirectional, zero-emissions" vehicle. The vehicle can be used in complex environments for on-demand mobility.

According to Amazon, the two companies will work together to design the autonomous ride-hailing vehicles (robotaxis) from the ground up and incorporate passengers’ needs first. According to Jeff Wilke, Amazon Worldwide Consumer CEO, "Zoox is working to imagine, invent, and design a world-class autonomous ride-hailing experience."

The new deal is hardly a surprise from Amazon this year. On Mar 31, Amazon partnered with ride-hailing company Lyft, Inc. (LYFT - Free Report) . Per the agreement, Lyft asked its drivers to consider job opportunities at Amazon as an additional income source. These include employment as delivery drivers, warehouse and shoppers.

Amazon is taking a similar approach with Zoox, although its involvement will be on a much larger scale, considering that the former will be purchasing the latter. Although Zoox will continue to operate as a standalone business, Amazon’s exclusive agreement with the start-up takes into account two lists of “key employees,” a CNBC report cited.

The employees on the first list must take jobs at Amazon for the agreement to close, and at least 19 from the second list must stay. Amazon plans to offer employment to three schedules of other employees of the start-up, requiring that 90% of the first two and 88% of the third accept jobs to conclude the agreement.

From the first look of the deal, one may consider that Amazon has a farsighted plan to work with Zoox to expand its ride-hailing business. This means that the space of autonomous taxis no longer belongs to Uber Technologies, Inc. (UBER - Free Report) and Lyft. In fact, Amazon and Zoox clearly have an advantage that could prove difficult for the aforementioned companies’ business models to surpass. After all, self-driven, ride-hailing vehicles do not require drivers.

Amazon has an expected earnings growth rate of 92.1% for the next year. The Zacks Consensus Estimate for the company’s current-year earnings has moved 2.1% north in the past 60 days.

Shares of the company, which belongs to the Zacks Internet - Commerce industry, have gained 66.9% on a year-to-date basis as compared to the industry’s rise of 48.9% during the same period. Amazon’s shares closed the Jul 14 trading session at $3,084.

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