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Amazon (AMZN) stock is set to climb higher as the company suspends its new shipping services to focus on its core business as customer demand spikes.
Amazon.com Inc (NASDAQ: AMZN) has announced plans to suspend its delivery service until further notice. The company had started Amazon Shipping to rival other logistics giants like FedEx and UPS, making the option available in a few places, including Los Angeles. However, according to a Wall Street Journal report, Amazon will stop from June, and focus on its own business, which should, in turn, keep its stock rating high.
Amazon Delivery Service Postponed
Because of the current coronavirus pandemic, Amazon has seen a dramatic surge in orders on its platforms. The lockdown implemented by the government to slow down the virus has forced people to look to online shopping as opposed to going out to stores, even for essential stores that aren’t affected. Because of this spike in orders, Amazon needs to pull resources back to its own business to satisfy customers. In a message to shippers, Amazon said:
“We understand this is a change to business, and we did not take this decision lightly…We will work with you over the next several weeks so there is as little disruption to your business as possible.”
Amazon Stock (AMZN) Is Up
The pandemic seems to have a silver lining for Amazon and its stock. According to RBC’s Mark Mahaney in a recent message to clients, the company concluded a survey on online groceries, especially at a time like this where options are limited. It found that there is a “growing adoption” in the business, suggesting that online grocery outfits are set to benefit significantly. Mahaney writes that if Amazon fine-tunes its customer experience, this part of its business could contribute over 10% of its revenue by 2023.
For Mahaney, the pandemic presents an inflection point because more than half of all respondents are willing to keep shopping online for groceries. He says Amazon’s grocery revenue alone could climb up to $90 billion. Currently, at a premarket figure of $2,017.09, Mahaney set a price target of $2,429.97 for Amazon (AMZN) stock.
In the last three months, nearly 40 analysts have given AMZN a clear Buy rating. This is interesting because most of the market believed the pandemic would kill Amazon. However, the company’s stock has braced the situation quite well. On March 12, AMZN fell to $1,676 and seemed to corroborate the predictions. Its current price shows quite obviously that it’s been able to weather the storm.
Can Amazon Keep Up?
Many investors have noticed that instead of the opposite, the pandemic has caused a spike in online shopping. Apart from suspending Amazon Shipping, the company has also inked a partnership with Lyft, to meet these demands. Amazon has hired Lyft drivers to join its warehouse and delivery efforts, so it can meet up.
However, there are worries that Amazon might not be able to handle the surge. Reports suggest that the moment, Amazon orders are about 50 times more than what the company currently sees. This makes it quite worrisome and suggests that regardless of the company’s moves, it might not keep up.