Amazon (AMZN) Logistics Continues to Expand - Baird

Baird analyst, Colin Sebastian, noted that Amazon (NASDAQ: AMZN) announced another expansion of its free same-day delivery offering to 11 new cities, with 27 metro areas now served in the U.S. According to Amazon, “millions” of its customers have already used free same-day delivery, which includes access to more than one million product SKUs. This program supplements the Prime Now (1-2 hour delivery) program, which currently serves a smaller geographical footprint with fewer (tens of thousands) of product SKUs.

Fast delivery also helps explain transportation/logistics investments. Amazon’s fast-expanding fulfillment and logistics infrastructure is also enabling the roll-out of same-day and 1-2 hour delivery programs. In addition to the creation of a three-tiered fulfillment infrastructure (including regional sortation and local delivery centers), Amazon is also deploying fleets of delivery trucks, and is quickly expanding the use of the Flex Driver program, which is Amazon’s on-demand (Uber-like) contract delivery service. Importantly, they also believe that Amazon's new investments in logistics and transportation (including leasing cargo planes) will support the roll-out of fast-delivery by more efficiently moving and balancing inventory levels among its fulfillment network.

No change to $710 PT based on 25x 2016E EV/EBITDA. This represents a premium to mean comparables of 18x due to Amazon's higher growth profile.

For an analyst ratings summary and ratings history on Amazon.com click here. For more ratings news on Amazon.com click here.

Shares of Amazon.com closed at $586.14 yesterday.

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