The following commentary was originally sent to Growth Seeker subscribers on March 9. Click here to learn more about this dynamic portfolio product.
In our Weekly Roundup from Monday (click here to read), we shared expectations for a somewhat slower week given the lack of fresh economic data and slower pace of corporate earnings, but it's shaping up to be far busier thanks to company-related news.
One of the busier ones has been Growth Seeker holding Amazon (AMZN), which last night unveiled its first daily show, Style Code Live. The program, which will stream live on Amazon.com weekdays at 9 p.m. ET, is expected to offer fashion and beauty tips. This reinforces our recent comments about the company's push into its own apparel line, as well as be more interactive. The interactivity is slated to include being able to shop looks straight from the screen and a live-chat feature. This all may sound a bit like TV shopping channels, such as QVC (QVCA) and Home Shopping Network (HSNI). This news follows Amazon's recent announcement that it would begin airing a free reality show, The Fashion Fund, featuring a competition among up-and-coming fashion designers.
Stepping back, Amazon has made a strong push into video programming and these latest initiatives look to combine video and online shopping, which in our view becomes a competitive differentiator as Amazon looks to take apparel share. We see these as initial steps as Amazon is looking to push online shopping suggestions in a non- threatening manner in order to drive transactions and potentially expand shopping carts.
Also this morning, Amazon inked a deal with Air Transport Services (ATSG) to operate an air cargo network in the U.S. that includes leasing 20 Boeing 767 freight aircraft to Amazon Fulfillment Services.
As part of the agreement, Amazon will also hold warrants giving it the right to acquire up to 19.9% of Air Transport Services over a five-year period. With Fulfillment by Amazon (FBA) continuing to grow dramatically, as we saw during the holiday season, and Amazon looking to rein in costs where possible, we are not surprised by this agreement, particularly since there has been much chatter about Amazon entering the freight aircraft market just as it has entered other partnerships to cut time to customer. While this is likely to be de minimis on the company's overall cost structure, should it continue to move in this direction it could mean that one day oil and jet fuel prices are something to consider, but for now we see no such concern.
These announcements, which we suspect will be followed by more in the coming months, are in sync with Amazon's strategy to bring more to its growing customer base in an increasingly timely fashion. They also have the added benefit of expanding the competitive moat around its online shopping business. We continue to rate AMZN shares a One with a $725 price target.