Amazon (AMZN) Gains on Fulfillment Strength Led by Robotics

June 1, 2024

19 3 minutes read

Untitled design6 — 4ec6c6138740981e7c7233e1bbeee26f.jpeg

Amazon’s AMZN shares have gained 19.7% year to date, outperforming the Zacks Retail & Wholesale sector’s return of 9%. The e-commerce giant is continuously gaining momentum in the booming online shopping space on the back of its distribution strength and expanding fulfillment network. Amazon currently has 110 fulfillment centers in the United States and 185 such facilities globally.

The company’s deepening focus toward aiding automation at its fulfillment centers on the back of Amazon Robotics remains noteworthy.

To maintain its dominant position in the e-commerce market, Amazon needs to continue investing more in fulfillment centers in the United States and the international regions.

In this regard, the company recently inaugurated a robotics fulfillment center called YYC4 in Canada, located in Calgary, Alberta.

This facility, spanning 2.8 million square feet, is designed to improve the work efficiency and safety of workers through automated systems and robots. YYC4 is equipped with RWC4 robotics technology, which aids in sorting totes and constructing pallets for shipping. Amazon has also deployed a trolley called Kermit that transports empty totes.

The company strives to offer in-demand skill training, create job opportunities and fulfill customer orders as fast as possible with the help of advanced robotics technology.

With the launch of YYC4, Amazon has expanded its presence in Canada. It now has five fulfillment centers, one sortation center, three delivery stations and two AMXL delivery stations in Alberta.

Amazon.com, Inc. Price and Consensus

Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote

Robotics Fulfillment Strength to Aid Growth

Robotics that utilize AI and ML techniques are becoming mainstream in the retail industry. Per a report from Maximize Research Report, the global market for retail robotics is expected to witness a CAGR of 32.5% between 2023 and 2029.

Amazon remains well-poised to capitalize on this growth prospect on the back of its increasing number of robotics fulfillment centers worldwide.

Per the first-quarter 2024 earnings release, the company operates robotics fulfillment centers in 11 countries, and they help improve workplace ergonomics, and reduce heavy lifting and repetitive tasks.

Amazon intends to open such facilities in Asturias, Spain and Sagamihara City, Japan.

The company’s concerted efforts in advancements of its retail and fulfillment robots are other positives.

Amazon’s introduction of a mobile robot, namely Titan, which is designed for lifting up to 2,500 pounds in its fulfillment centers, is noteworthy. The company’s robotics technology also includes Sequoia, which helps identify and store inventory received at the fulfillment centers up to 75% faster than humans. This way, it helps increase the number of goods delivered the same day or next day.

Growing fulfillment robotics strength is expected to aid Amazon in driving its customer momentum in the e-commerce space. This, in turn, will drive growth in its online store sales, which stood at $54.7 billion in first-quarter 2024, up 7% year over year.

The Zacks Consensus Estimate for the same metric for 2024 is pegged at $244.8 billion, indicating growth of 5.6% from the 2023 reported level.

Strengthening online store sales will, in turn, aid Amazon’s overall financial performance.

The consensus mark for 2024 sales is projected at $638.24 billion, indicating year-over-year growth of 11%. The same for 2024 earnings stands at $4.58 per share, suggesting year-over-year growth of 57.9%. The estimate has been revised upward 11.7% over the past 30 days.

In regard to competition, the Zacks Rank #3 (Hold) company, with its expanding robotics capabilities, has intensified the battle for Walmart WMT, which is trying to narrow down its gap from Amazon in the e-commerce category.

Walmart’s growing deployment of moving shelf-scanning robots, which are capable of detecting any shelving error across its stores in the United States, remains noteworthy. The company is also accelerating the use of automation across its supply chain.

Zacks Rank & Stocks to Consider

Currently, Amazon carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the retail-wholesale sector are The Gap GPS and Coupang CPNG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Gap has gained 2.8% in the year-to-date period. GPS’s long-term earnings growth rate is pegged at 12%.

Coupang shares have gained 73.2% in the year-to-date period. CPNG’s long-term earnings growth rate is currently projected at 33.83%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report