Investors Need Not Worry about Strikes at Amazon
If you’re concerned about investing in Amazon, it’s time to put those worries to rest. Amazon has not only diversified its business, but it also has plans in place to handle any potential economic slowdown.
Let’s address the elephant in the room first: strikes. Strikes are already happening, and workers are continuing their efforts to unionize. Teamsters are currently on strike at the San Bernardino warehouse in California. However, Amazon remains resilient. According to a report from The Guardian, union victories at Amazon are declining rapidly. Amazon is united against unions, while the Amazon Labor Union itself is divided on its future actions.
Now, let’s consider the impact of a potential UPS strike. One strike has already been avoided as management presented a better offer that the union found reasonable. Losing UPS as a delivery partner would have been challenging, but Amazon has been reducing its reliance on UPS since March. In 2022, UPS handled 1.3 billion Amazon packages, compared to 1.41 billion in 2021, as reported by Retail Dive.
While a UPS strike could result in slower package deliveries, Amazon may be able to manage the situation, even if it lasts for an extended period. Currently, a UPS strike seems less likely due to progress made by management.
Amazon has Diversified its Operations
There is a valid concern that discretionary spending may decrease, which affects retailers. The recent Supreme Court decision to reject student loan cancellations proposed by the Biden Administration increases the likelihood of shoppers cutting back. However, with around half of Americans planning to shop during this year’s Prime Day (up from 30% in 2021), concerns about cutbacks may be exaggerated. Additionally, Amazon is prepared for a retail slowdown because it has diversified its business. In February, Amazon Web Services (AWS) accounted for 13% of Amazon’s profits. AWS has also entered the growing AI market, providing users with AI services without requiring extensive machine language experience. This presents a significant opportunity for Amazon.
Furthermore, as of June 12, Amazon generated approximately $25.21 billion from Prime Video and other Prime services. With the average Prime subscriber spending about $1,400 per year, Prime is a substantial business on its own.
Is Amazon a Buy or Sell?
Amazon receives strong support from analysts, with 37 Buy ratings and only one Hold rating. It is considered a Strong Buy almost unanimously. However, the potential downside is its limited upside potential. The average price target for Amazon stock is $141.09, offering an 8.35% gain from current levels.
Conclusion: Amazon is the Total Package
In summary, the risks associated with Amazon are often exaggerated, while the potential rewards continue to grow. Amazon is expanding its delivery operations, navigating union challenges, and diversifying its product line to capture future opportunities. There is still plenty of room for growth.
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