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Amazon shares could soar higher with air cargo service taking flight

The e-commerce and technology giant could see its shares soar even higher as its Prime Air fleet preps for major expansion in a move that would create an air cargo service to rival UPS.

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Amazon could see its shares soar even higher with the stage set for its Prime Air fleet to expand to about 200 planes in a move that would create an air cargo service capable of rivalling United Postal Service (UPS), according to a study released by DePaul University.

‘At a time when many other airlines are downsizing due to the pandemic, Amazon’s push for faster and cheaper at-home delivery is moving ahead on an ambitious timetable,’ said the report by DePaul University’s Chaddick Institute of Metropolitan Development. ‘Amazon Air’s robust expansion makes it one of the biggest stories in the air cargo industry in years.’

Amazon CEO Jeff Bezos launched Prime Air four years ago, with the air cargo service operating out of smaller regional airports located near to its warehouses with the aim of helping it move items to allow for one- and two day-delivery.

However, the e-commerce giant has invested $1.5 billion into a new facility based near Cincinnati which has the capacity for 100 aircraft taking around 200 flights each day. This new central hub is ‘a big deal’ and is crucial in Amazon moving to one-day shipping, according to Bezos.

Amazon still has a long way to go to before it has an air cargo service on par with UPS and FedEx but with the airline industry in turmoil, aircraft prices are sliding, making it the perfect time for Bezos to expand his fleet and his position in the overnight delivery services sector.

Amazon eyes driverless car start-up Zoox

Amazon is looking to acquire California-based driverless car start-up Zoox in a deal that could accelerate its automotive vehicle ambitions.

The deal is valued below its latest valuation of $3.2 billion based on its latest funding round in 2018, with the company receiving significant interest since its last capital raise from buyers, according to the Wall Street Journal.

‘Zoox has been receiving interest in a strategic transaction from multiple parties and has been working with Qatalyst Partners to evaluate such interest,’ the driverless car start-up said in a statement.

Analysts upbeat about Amazon

Amazon shares have climbed more than 25% year-to-date, outperforming the broader market with the S&P 500 down 7% over the same period.

Analysts believe Amazon shares could climb even further, with the company well-positioned to expand its presence in existing and new markets due to the shakeout brought about by the Covid-19 crisis which has wreaked havoc on the airline industry in particular.

Of the 45 analysts offering 12-month price forecasts for Amazon the median target sits at of $2700, with a high estimate of 3000 and a low estimate of 1840. The median target price implies a potential upside of 12.5%.

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  4. Click on ‘buy’ or ‘sell’ in the deal ticket

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The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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