Saturday, 30 December 2017

Jeff, Amazon, Trump, USPS & stocks

Hello Everyone,

On a fine friday 29th December 2017  Mr Trump tweets

Source:twitter.com/realDonaldTrump

Mr Trump has been quite vocal about his opinion regarding Amazon. But this time it has been a real concern for the USPS. As always a person with power was concerned with the government body not performing and the private company was to be blamed. 

Now lets see its effect on amazon's stock price

Amazon Stock Price on 29/12/2017






Source: finance.yahoo.com/chart/AMZN
What we observe here is the presence of Volatility in the market sentiment that such an amazing performing company stock prices fell by near around 1.1% Thinking about the market perception there can be two thoughts
  • The prices of the parcel will rise and which will hurt the amazon profit severly and can cost the stockholder's wealth (short-term)
  • USPS will ammend the parcel rate and hence the amazon will be charging more from customers and this will be ultimately visible in the topline(long term)
There are some factors that we need to think about this case. USPS has a monopoly in the field of first class mail but, its revenue from this segment is down by 40%. FedEx and  UPS are its cut-throat competitor for the parcel and package shipment segment. 

Now Amazon has contributed significantly in the USPS by giving them bulk orders delivery since the inception of the Amazon. Parcel/Package delivery unit of USPS is quite a money maker as compared to other businesses. The USPS has currently modified its rate and as of now there has not been any change in the rates, but after this Tweet the prices can change but, it all depends on how much this price changes that the market of amazon will be affected.

Since Amazon was getting  big discount from USPS what seems here is that USPS was dependent on Amazon NOT vice-versa because it brought the heavy orders for sufficing the thirst of USPS. Obviously the price of the package delivery will go up but, since Amazon has an upper hand in this case the cost wouldn't escalate that much. This escalation in delivery cost will be added in the net cost and the price that Amazon flashes on your beautiful laptop screen will go up by a decent margin.

However this wont affect the shopping experience and other factors but it might cost Americans on their pocket. Since people are dependent on the retailer so much that they would shop less for sometime but, will again hop on the wagon and the number of orders will keep on increasing. This might affect the topline for 1st quarter but, it would become normal by the beginning of the 2nd quarter. So in a short run the prices can be seen going south and by the next year mid the prices will be seeing an upward tick and as the normal trend will follow. So keep an eye on the pricing policy of USPS. If it comes out strict on Amazon then stocks will  suffer a huge time, but if the policy is mild on the company the festival will continue.

Last but not the least my two cents will be "To look at all the amazon related news connected with USPS and end quarter results of Amazon, then and only then invest in the Amazon for long run". With this i wish you a very HAPPY NEW YEAR and may the new year brings a lot of wealth and investment opportunity with it. Till then for my international readers shop on www.amazon.com  and my Indian readers  www.amazon.in . And by the way keep your eye on this website for Amazon related stock movement  finance.yahoo.com/quote/AMZN


Amey Kashyap

    1 comment:

    Shailja said...

    Well written😊