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Amazon.com Inc. (AMZN - Free Report) has announced its plans to open its first fulfillment center in Staten Island, NY. This new facility will be equipped with modern technology.

Also, it is likely to deploy robots which will decrease the time taken to sort and pack products, thus strengthening its same-day or overnight delivery services.

Notably, Amazon has underperformed the industry on a year-to-date basis. Shares of the company have gained 29.1% compared with the industry’s growth of 47.0% in the same time period.

About the New Facility

The 855,000-square-foot fulfillment center is being developed by Matrix Development Group. It will feature innovative technology like deploying robots to speed up its deliveries. Going forward, the center is expected to create more than 2,250 new full-time jobs.

Meanwhile, Amazon has been increasingly investing to build and modernize fulfillment centers mainly to cut shipping costs and speed up delivery. The company also plans to open more centers in Sacramento, CA; Kansas City, KS; North Randall, OH and other cities, which will add to more than 80 such centers worldwide.

In 2016, Amazon’s capital expenditure increased 51% on a year-over-year basis. A major part of it was used in the construction of 26 fulfillment centers and deployment of robotics technology inside them.

A Prudent Capital Investment

Fulfillment centers help Amazon in storage and shipping of products, besides handling returns quickly. In fact, these are important for providing the level of services that customers expect from the company.

In addition, small retailers that are unable to provide relatively cost-efficient shipping are signing up for Amazon’s fulfillment services. Third parties also avail the company’s warehouses and shipping services. These, in turn, help the company boost revenues and drive expansion in the long haul.

Although heavy investments in these arrangements (and several other initiatives) keep Amazon’s margins under pressure, they are also responsible for the company’s progress. Evidently, Amazon’s retail business is currently unbeatable on price, choice and convenience in the face of fierce competition from Alibaba (BABA - Free Report) and eBay (EBAY - Free Report) , among others.

Furthermore, we believe that Amazon’s long history of execution, growing focus on innovation, technological prowess and huge cash balance not only give it the flexibility to pursue growth in potential areas but also create value for investors.

Amazon.com, Inc. Price and Consensus

 

Amazon.com, Inc. Price and Consensus | Amazon.com, Inc. Quote

Zacks Rank & Stock to Consider

Amazon currently has a Zacks Rank #5 (Strong Sell). A better-ranked stock in the broader technology sector is Lam Research Corporation (LRCX - Free Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lam Research delivered a positive earnings surprise of 4.44%, on average, in the trailing four quarters.

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