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Amazon is Eating the World

Amazon is Eating the World

 

It is no secret that Amazon is expanding its business into other sectors. The company wants to be the operating system of your life. Not only does Amazon want to be your go-to shopping destination, but it also wants to provide you entertainment with Amazon Prime Videos, cloud computing platform with Amazon Web Services, and groceries through Whole Foods and Amazon Prime Now. In the US, many companies fear Amazon. It is well known for its efficiency and execution ability that even the rumors of Amazon entering a new sector will cause incumbent stock prices to fall.

Figure 1: Timeline of Amazon causing share prices of incumbent companies in different sectors to fall.

 

Here are times when the news of Amazon entering a new market cause incumbents’ share price to drop:

  • 18th January 2017: Announcement that Amazon is building a new $1.5 billion air cargo hub in Kansas, USA. Share price of UPS and Fedex (FDX) dropped.
  • 16th June 2017: Announcement of Amazon’s acquisition of Whole Foods Shares of leading retail and grocery providers Target (TGT), Walmart (WMT), and Kroger (KR) fell.
  • 21st June 2017: Rumors that Amazon is close to inking a deal with Nike to directly sell sports apparel. Stock prices of leading sports retailer dropped: Dick’s (DKS). Sportsmans (SPWH).
  • 30th January 2018: Announcement that Amazon is teaming up with JP Morgan Chase and Berkshire Hathaway to form a healthcare partnership to reduce costs to their employees. MetLife (MET), CVS, and UnitedHealth (UNH) share prices dropped, wiping billions of dollars in market cap.
  • 9th February 2018: Announcement that Amazon will start testing its own package delivery service. Shares of UPS and FedEx (FDX) dropped.
  • 6th June 2018: Unconfirmed reports that Amazon will start offering home insurance service. Stock prices of leading home insurance services, such as Allstate (ALL), Chubb (CB), Hartford Financial (HIG), Travelers (TRV), and Progressive (PGR) dropped in after market trading.
  • 28th June 2018: Amazon acquired online pharmacy company PillPack, indicating that the company is entering the drug prescription fulfillment and delivery business. Share prices of various companies in the drug prescription value chain took a tumble: CVS, Rite Aid (RAD), and Walgreens Boots Alliance (WBA), Cardinal Health (CAH).

 

In addition to its core e-commerce and cloud computing businesses, Amazon is expanding into logistical services, health insurance, drug prescription, and home insurance. All of this is in addition to its fast growing advertising businessAmazon is eating the world.

 

This article is meant to be informative and not to be taken as an investment advice. Our team members at Vested may own investments in some of the aforementioned companies. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.

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