Amazon has underperformed the S&P 500 so far in 2021, but key deals have seen its shares rally as we enter sales season for the tech giant
Nov. 22, 2021
With new trends popping up all the time attracting excitement from investors, you’d almost forget about poor old Amazon (NASDAQ: AMZN). Amazon has been underperforming some indexes since the start of 2021, but if you take a five-year view, it has delivered 3x the returns of the S&P 500.
And now, three new partnerships have sent its stock soaring.
Amazon has much more than a partnership with the hottest IPO of 2021. It actually holds a 22% stake in Rivian (NASDAQ: RIVN), as well as ordering 100,000 electric delivery vans from the company.
Rivian Fleet has an operating system (OS) that will connect telematics, charging, and maintenance which aims to maximize cost efficiencies and the sustainability goals of organizations. While Rivian itself has generated little to no revenue to date, Amazon’s stake gives them exposure to the clean energy fleet market, in the hope that companies will adapt to this model in the future.
The deal is in line with its own sustainability efforts too, targeting for operations to be 100% powered by renewable energy by 2025. Amazon, along with 100 other companies spanning 16 countries, has signed up for “The Climate Pledge”, an initiative that aims to achieve net-zero carbon by 2040.
Amazon recently partnered with the international hotel chain, Hilton (NYSE: HLT). It will offer its Amazon Care services to over 141,000 Hilton employees, marking its biggest deal to date in telehealth. It offers chat functions, checkups, and video or in-person medical appointments. As significant as the deal is, it’s likely just the beginning of Amazon’s journey in the health sector, and if all goes well, more and more multinational corporations could sign on for its services.
Although the exact cost to the Hilton and its employees has not yet been revealed, the telehealth sector itself is projected to grow at a 32% compound annual growth rate (CAGR), with the total market estimated to reach a value of approx $636 billion by 2028. By going the business-to-business (B2B) route, Amazon will be able to onboard more total members, achieve economies of scale, and add cost savings for customers, which will help them compete with current industry leaders, such as Teladoc (NASDAQ: TDOC).
Amazon acquired Whole Foods in 2017, and shortly after, it rolled out its ‘just walk out’ technology. This meant sensors, cameras, and scales can detect what a customer has taken and tallied up the shopping total for them. This is part of the ‘Amazon Go’ service, which facilitates cashier-less payment through the use of apps, and Starbucks (NASDAQ: SBUX) is the latest customer putting it to use. Starbucks noticed the behavioral impact the pandemic has had on how people eat and drink, and adding the Amazon Go’s functionality gives customers more optionality.
What does it mean?
It means Amazon is nowhere close to slowing down. All of the above examples show Amazon’s dedication to building an ecosystem of products and services that can not only serve its customers, but also the customers of all businesses.
Even though it hasn’t seen the extravagant returns its investors have been accustomed to over the last number of years, this company is making investments or is pioneering, the industries that will likely shape the next decade.
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