What does the future hold for Amazon? These investments tell a story!
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What does the future hold for Amazon? These investments tell a story!

Ecommerce titan Amazon remains a dominant figure on the digital landscape. The company is synonymous with online retail, and has developed market-leading businesses in areas such as cloud computing, AI-driven virtual personal assistants, and streaming entertainment services. But despite its on-going success, Amazon’s core business shows signs of slowing growth – after all, when you’ve cornered such an enormous proportion of the market, where can growth come from? If you’ve been wondering about Amazon’s future, then get ready for some fairly well-grounded speculation: you can tell a lot about Mr. Bezos’s plans from the investments he’s been making.

Amazon’s share price has improved by 22% so far this year

29 05 amazon

Source: Yahoo Finance

In the last year, Amazon has spent billions of dollars setting itself up for future growth. Detailing that in any kind of rigorous manner would take more than a few hundred words – but if you’re interested in getting an overview of the kind of areas the company is expanding into, read on.

Almost a year ago, in June 2018, Amazon made a big purchase that sent the media into a frenzy: a $753 million acquisition of PillPack. PillPack is a market-leading online pharmacy in the US. The business model is simple: package up and ship out drugs online, rather than through brick-and-mortar locations. This acquisition strongly hints that Amazon intends to do for pharmacies what it did to bookshops in the 90s. True, the businesses aren’t identical – pharmacies may prove more robust for a number of reasons – but the company’s ability to disrupt established industries is no longer up for dispute.

Earlier this year, Amazon invested an undisclosed amount in Aurora, a self-driving car start-up. Here, we’ll let the company do the talking. In a statement released at the time, Amazon said: “Autonomous technology has the potential to help make the jobs of our employees and partners safer and more productive, whether it’s in a fulfilment centre or on the road, and we’re excited about the possibilities.”

Aurora isn’t the only transportation company Amazon has invested in. The company has also ploughed $700 million into Rivian (an electric truck start-up), and its own air fleet. Amazon has pledged to extend Amazon Air by 50 planes and a number of new regional hubs. One of those hubs in Northern Kentucky (which will open by 2021) has seen $1.5 billion pumped into the region.

The last investment worth talking about (well, except Deliveroo earlier this month – but we’ve covered that last week) is Project Kuiper. This ambitious initiative will see Amazon cover the skies all around the globe with satellites to beam high speed internet everywhere. Yes, that’s expensive (a ball park figure of $3 billion has been mentioned) – but just think of all the new customers it could bring the company!

All in all, Amazon’s incredible growth story may be slowing its pace somewhat – but it’s quite clear from the company’s recent investments that there are plenty more industries left for Amazon to disrupt.

Disclosure

Dominion holds Amazon in its Global Trends Ecommerce Fund. Share price as-at 23 May 2019.


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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.