The rapid spread of COVID-19 has led to a fall in financial markets, consumer panic, and governments are encouraging citizens to stay home and stay away from others. Amazon (NASDAQ: AMZN) is one of the companies with the best opportunities to provide basic services to consumers who are isolated at home. It is the largest e-commerce company in the U.S. and is developing its services for the delivery of food and basic consumer goods.
Amazon Web Services is the foundation for key e-commerce services, which have grown in demand as schools require students to sit at home in isolation, and companies send employees to work remotely.
Since WHO declared the Coronavirus a pandemic last week, consumers have been panicking to buy necessities from food stores. Even Amazon is not resistant to the increased demand for basic consumer goods. On Friday, the company reported that some products were out of stock and online orders were delivered longer than usual because of increased demand.
Amazon is in a better position to benefit from the shift from conventional stores to online shopping. While Amazon competes in product delivery with competitors such as Walmart and Target, it can deliver many products directly from the warehouse, improving wide availability and the ability to replenish quickly. What's more, Amazon provides fast (often on the same day) delivery with a Prime subscription, while Target and Walmart offer customers either pay for delivery or register for their annual subscription. Schools are closing. Students are told not to return to campuses after spring break. Employees are stuck at home.
But technology allows students and workers to stay in contact with each other. One popular platform is a video conferencing software Zoom, which runs on Amazon's cloud infrastructure. Many other learning and working platforms, including Slack and Instructure, use Amazon web services as the basis for their products.
Demand for Amazon Web Services can be expected to progress as more and more work is done online. And while the company has faced increased competition over the past few years, Amazon remains the market leader, especially in areas where it does not encounter straight with its customers (e.g. retail).
Quarantine is likely to result in much more time being spent on the sofa: reading books or watching TV. And watching TV means more demand for streaming video. Amazon is also winning in this area. First, it gives its streaming video services - Prime Video and IMDb TV. Adding Prime Video to a standard Prime subscription also strengthens Amazon's retail business, making it even more valuable. Secondly, the Fire TV platform is one of the two major streaming platforms in the US. Amazon charges a fee for distributing video subscriptions and takes a percentage of the advertising. If consumers subscribe to a new streaming service or start watching more video on their Fire TV devices, Amazon will profit. Finally, Amazon provides feedback for popular streaming services such as Netflix via AWS. Expanded content distribution via Netflix means that Amazon increases the billing for one of its largest customers.
Overall, Amazon is expected to generate significant revenue in the first quarter due to unexpectedly increased demand for its services. The company's management initially focused on revenues between $69 and $73 billion. If the coronavirus outbreak leads to the choosing of such key services like Prime and product delivery, Amazon could have a steady increase in revenue.