What can’t Amazon (AMZN) do? What can’t it disrupt? Any company with any kind of consumer product is vulnerable to them and lately it has become almost too onerous to own something that could be in the company’s crosshairs.
And while it didn’t control today’s action we have to analyze what can happen when the death star strikes.
I like the stock of Spotify (SPOT) . The company has a chance to be the next Netflix (NFLX) as they totally understand what you want because they use artificial intelligence to match your thoughts with their tunes. I love the premium model where you can get music for free with ads or you pay extra to get streaming music and no ads. We use it at home, we use it at our two restaurants. Our kids love it. So, we pay for it regularly without thinking about it. Plus, I like their addition of podcasts courtesy of a recent acquisition and the company seemed well underway toward having a big moat and a great algorithmic way to keep you hooked.
Then this morning we learn that Amazon might be about to rollout a similar service to Spotify’s free version. So Spotify fell six points today.
Now I don’t know how real this Amazon foray might be. But the fact is that the stock of Spotify will never trade the same again because there are 100 million Amazon devices that can make this thing work and destroy Spotify’s moat, making it potentially an also-ran in its own world.
This kind of assault is almost a daily occurrence and while we have talked about it before it just doesn’t stop.
Walgreen’s (WBA) recently reported a dismal number, simply awful, and it wasn’t good in the front or the back. The front? No one ever seems to want to say it but that’s Amazon eating at the margins. The back? If you look up an outfit called PillPack you can see that this Amazon subsidiary has a cheaper, better way to get you your drugs.
Walgreen’s is not ready.
But maybe it doesn’t matter if you are. CVS (CVS) now gives you same day service for $7.99 via Shipt. But that stock has been crushed the same way Walgreen’s has and, like Spotify, it will never change again.
Then there is FedEx (FDX) . This great American transports is not beholden to Amazon at all. It doesn’t need their business although as with anyone they will take it. But more disturbing is how they can’t pivot like Amazon which is now using its own delivery service to keep prices down. Their sheer scale is an existential threat to anyone in the space even as CEO Fred Smith said on Mad Money that none of these initiatives has hurt them one bit. Amazon is a teeny client of theirs, less than 2%.
There are endless possibilities here. Let’s say Amazon builds out its own delivery system. Well then, is there anything proprietary to own if you buy shares in Grubhub (GRUB) ?
I look at Pinterest which will soon be public and I say to myself why can’t Amazon replicate that. They are behind but if you build in a voice function that competes with Pinterest it could be very popular.
Last week we saw the stock of Bed Bath (BBBY) get crushed. Why? The company is, once again, digitizing but to what effect? It simply is the easiest to Amazon and it really only had good numbers for a bit only because 10 years ago its brick and mortar competitor, Linens & Things, went under. Maybe the insurgents can save it because it doesn’t have much debt. But we know that Sears and J.C. Penney (JCP) never came back.
If you read through CEO Jeff Bezos’ letter you know that as its Amazon web services grow you could take all of the analytical companies that search through or see patterns in data arch or, in general, harness the web, and they could be disrupted, too. They don’t deserve to have the same multiple they used to once Amazon keeps adding superior stuff to the mix.
Now some seem to have companies that have developed immunity through service. Today Best Buy (BBY) announced the changing of the guard from Herbert Joly to Corie Barry, the CFO. She was widely credited for creating a culture of service that makes it imperative to use them, not Amazon, for anything complicated. There is no Amazon in home service.
We know that the auto parts business was supposed to be challenged by Amazon and once that view was discredited AutoZone (AZO) just took off followed by its tremendous buy back. I just await to hear when the rumors start that they want in again.
Cisco (CSCO) was supposed to get Amazoned as the Death Star was reportedly making routers and switches. Not true; great buying opportunity, the last good one.
Now earlier this year we talked about how this Death Star concept, and if you want to, you can pick among the stocks that got killed that Amazon couldn’t crush. Ollie’s Bargain (OLLI) has no online competitor because it’s all closeouts and Amazon can’t come underneath them. The dollar stores have too low a price point, too. Microsoft’s (MSFT) Azure and Alphabet’s (GOOGL) Google Web Services both competitors to web services, have a lot of business but Amazon Web Services keeps cutting and cutting price.
But I think that anything Amazon wants to do right now with so many prime members would go over well. It could create a stock market. It could have its own currency like Kohl’s (KSS) . It could manufacture knockoffs of superior quality the way Costco (COST) does. Amazon toilet paper, Amazon Bleach. Amazon pet food. The most trusted name in pet food and it isn’t even out yet. That’s how dangerous this company is to all who go against it.
It could create Rent the Runway. Or a Stitch Fix. It’s hard to find something they can’t do. Who knows what will happen with their venture with JP Morgan (JPM) and Berkshire Hathaway (BRK.A) (BRK.B) to bring down the cost of health care. If they can offer some sort of same day service on all tests and become a buying group that’s nearly like the Veteran’s Administration in its power to get drugs, how could they be stopped? They would be a Theranos without the chicanery and fraudulence. Health care seems totally vulnerable to these guys, much more vulnerable than it is to the U.S. government, provided they have time to focus on it. It’s a bandwidth problem but you know they will solve that.
Why can’t Amazon be your bank? Why can’t it be your online credit card? Why can’t it be your online doctor?
Again, it can be whatever it wants. Which is why you must add something new to any stock you are about to buy. Could Amazon come in and destroy the margins?
If so you have to lower expectations unless your company doesn’t deal with the consumer. Some thought Bezos had been drive to distraction. Now it just looks like he’s more driven than ever and almost nothing can be saved from its wrath.
(Amazon, CVS, Home Depot, Cisco, Microsoft, Alphabet, Kohl’s and JP Morgan are holdings in Jim Cramer’s Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN, CVS, HD, CSCO, MSFT, GOOGL, KSS or JPM? Learn more now.
Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.