Amazon.com, Inc. AMZN has partnered with Canadian cargo airline company, Cargojet Inc., in a bid to ramp up its delivery efforts.
Reportedly, the company will acquire a minority equity stake in Cargojet. It already utilizes Cargojet’s air network and charter aircraft services to move packages from its facilities to other carrier locations for ensuring timely deliveries to customers.
This deal is inline with the company’s other partnerships with air carriers, namely Atlas Air Worldwide Holdings Inc. (AAWW) and Air Transport Services Group Inc. (ATSG).
The online retail giant’s strategic motive behind these deals is to build and expand its own in-house shipping and logistics service to support the complex network of fulfillment, logistics and delivery systems.
Amazon Expands Delivery Infrastructure
Amazon is taking bold steps to get an edge in the logistics business. It has built out a network of warehouses and shipping infrastructure to drive delivery time for customers.
In June, Amazon teamed up with GE Capital Aviation Services (GECAS) to increase the number of its aircrafts. These new cargo aircrafts would become part of Amazon Air network and will be fully operational by 2021.
In addition, the company announced plans to open a regional air hub at the Fort Worth Alliance Airport, which is expected to commence operations this year and create multiple job opportunities for North Texas residents.
The latest move underscores Amazon’s accelerated push toward building its own in-house shipping and logistics service to support the complex network of fulfillment, logistics and delivery systems that it has been building.
The company — which has built a strong network of fulfillment centers worldwide — deploys robotics, machine learning, algorithms and other technological advancements to improve delivery speed.
Building its own in-house shipping and logistics service will help Amazon address increasing delivery demand and improve delivery speed at the Prime business.
Amazon continues to benefit from the robust Prime program, which gives it a competitive edge in the retail business. Prime boasts a loyal subscriber base. Its offers and fast delivery services encourage customers to spend more on Amazon, in turn helping to boost revenues.
Notably, Prime members are much more loyal and spend double the amount spent by non-Prime members.
Given increasing engagement of Prime customers, the company is leaving no stone unturned to ensure that their requirements are met. From the span of a day to two hours, two hours to 15 minutes and 15 minutes to two minutes, Amazon has been cutting down on delivery time for Prime members.
Therefore, we believe that the company is moving in the right direction by gaining control over the delivery services network, whose demand is expected to grow going forward.
Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote
Zacks Rank & Stocks to Consider
Amazon currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Alphabet Inc. GOOGL, Itron, Inc. ITRI and Teradyne, Inc. TER, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth for Alphabet, Itron and Teradyne is currently projected at 17.5%, 25% and 11.4%, respectively.
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