Amazon, Autonomous Drones, Walmart+ and Zoom

Amazon gets FAA approval for its drone fleet, Walmart announces an Amazon Prime competitor and Zoom raises its full-year outlook.
(By Thisis_beauty)
(By Thisis_beauty)
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Good morning! Today’s word count is 1,508 words, or an 8-minute read. Let’s get to it:

“Manufacturing activity in August offers a view into the strength of the recovery in the American economy,” WSJ writes.

  • S&P 500: $3,513.53
  • Nasdaq: $11,896.41
  • Bitcoin: $11,879.97
  • U.S. 10-Year: 0.703%

Justin Oh’s Quick Read: $TSLA

I’ve sold out of all my Tesla ($TSLA) shares. Even if they pull off monopolies in antonymous taxis and battery manufacturing, it will take a long time. $TSLA is now valued at $470 billion, which is more than Visa, J.P. Morgan & Chase, and Walmart and represents an insane 55x 2021 and 40x 2022 estimated gross profit. That’s a valuation more than quadruple that of Salesforce ($CRM) and matched only by the fastest-growing, high-margin cloud companies like $DDOG, $FSLY, and $SNOW. Having to hold this valuation through quarterly financial reports that don’t justify it, along with possible execution risks and competition, is a ride I’d rather get off of while I’m already ahead. Hopefully, I can afford to ride $TSLA again sometime in the future.

Amazon Gets FAA Approval for Drone Fleet, A Package-Delivery Milestone

Amazon is one step closer to its drone delivery vision. The tech giant received FAA approval Monday to construct a fleet of drones, and the company plans to start limited testing to U.S. customers.

Why It Matters

For Amazon, this milestone has been highly anticipated.

  • Back in 2013, Amazon CEO Jeff Bezos ambitiously predicted drone delivery would arrive in five years.
  • The company successfully tested the technology in England four years ago, but the process has taken longer than Amazon executives expected.
  • Amazon views Prime Air as a potential boon to rural areas, where opening delivery stations wouldn’t make financial sense.

The autonomous delivery space has become popular but saturated.

  • Amazon joins UPS and Wing (Google) as companies with permission to test deliveries using autonomous air fleets.
  • Wing began delivering food and other supplies to customers in Virginia last year while conducting tests with Walgreens and FedEx.
  • UPS has been using drones to carry medical supplies at a hospital network in Raleigh since receiving FAA approval last year.
  • Other companies, such as Uber, have conducted limited drone tests but haven’t received FAA approval.

That’s because drones could revolutionize supply chains.

  • Both startups and legacy companies see drones as a way to speed up delivery efficiency.
  • The growth in noncontact package deliveries, as a result of the Covid-19 pandemic, has supported this idea.

Drone deliveries are still years away.

  • The FAA still needs to complete rules for remote identification of nearly 500,000 commercially registered drones, and figure out separate rules for drones to fly over regularly populated areas.
  • Automated air-traffic-control networks still use existing radars, and human controllers wouldn’t be able to handle the massive increase in drone operations, so the FAA still needs to establish an automated alternative.
  • The FAA has been doing preparatory work for drone deliveries for around four years and expects the White House to hand down federal regulations by the end of this year.

Numbers to Consider

  • Amazon envisions delivering packages to customers from warehouses in less than 30 minutes.
  • Its current drone technology can carry packages of 5 pounds and fly a round-trip distance of 15 minutes.
  • Amazon opened at $3,489.58 this morning.


Walmart Tries Again to Find Its Answer to Amazon Prime

Walmart is revamping its grocery delivery service to compete against Amazon Prime. The new service, Walmart+, will launch on Sept. 15 as a $98-a-year membership that includes free grocery delivery, a discount on gas from Walmart parking lots and the ability to use mobile check out in-store. Members will also be eligible for free home delivery on some of the roughly 130,000 items offered from Walmart stores (delivery typically costs $9 per order).

Why It Matters

This isn’t Walmart’s first try as a membership service.

  • In 2017, Walmart sunsetted a previous attempt at a membership program called ShippingPass. The program offered free shipping on Walmart.com ordered, but the retail giant moved to provide free delivery on offers over $35 on its website.
  • Walmart+ is an updated version of the retailer’s Delivery Unlimited program, which it has been testing since last year. The company declined to say how many members it has.
  • It originally planned to internally rebrand Delivery Unlimited as Walmart+ and launch in the Spring, but the Covid-19 pandemic delayed plans. All Deliver Unlimited subscribers will automatically become Walmart+ customers.

Analysts like the move for Walmart.

  • It depends on how popular the program gets, but some analysts see potential in a new, potentially profitable revenue stream through Walmart+.
  • “We like Walmart’s chances of success with a subscription model,” said Simeon Gutman, retail analyst at Morgan Stanley in a July report. “Walmart has multiple assets it can leverage.” 
  • While Walmart could take a loss on the program in the short-term, it could help increase each customer’s spending over time.

TikTok could be an asset.

  • Walmart has partnered with Microsoft in its bid to acquire TikTok’s U.S. operations.
  • Access to the platform could provide a unique opportunity to plug Walmart+ and other Walmart products to a new audience.

Numbers to Consider

  • Amazon Prime has around 150 million members.
  • Walmart said its online sales grew 97 percent in the second quarter as Covid-19 prompted consumers to avoid stores and shop online.


Number Crunch: Zoom Again Lifts Full-Year Outlook as Sales Surge During Pandemic

Video conferencing platform Zoom raised its full-year outlook for the second time during the pandemic, “cementing its position as one of the biggest corporate winners from the shift to working from home and remote schooling.”

  1. Zoom reported sales of $663.5 million in the July quarter, a 355 percent increase from $145.8 million a year earlier. It also posted a profit of $187.5 million.
  2. The company said its most lucrative customer doubled in the past year. But it also benefited from more ubiquitous usage. Smaller companies, with 10 or fewer employees, accounted for roughly 36 percent of revenue, up from 20 percent six months ago.
  3. Zoom’s full-year outlook now expects sales to land between $2.37 billion and $2.39 billion. It’s adjusted operating profit is projected to reach as high as $750 million.
  4. Zoom began 2020 projecting less than $1 billion in sales. While many companies are contracting during this period, Zoom added 500 employees in the most recent quarter (53 percent more than a year earlier).
  5. Zoom expects sales to fall between $685 million and $690 million in the current quarter.


Worth Your Time

Future Tech: Apple is embracing the imminent launch of 5G technology. The tech giant has asked its suppliers to build at least 75 million 5G iPhones for later this year, predicting demand could reach as high as 80 million. It’s also planning to release new headphones, watch models, iPads and a HomePod. The projections are a strong indicator that Apple’s product demand is holding steady in the middle of a global pandemic and recession. (BLOOMBERG)

Slowdown Situation: “After demand for gasoline surged from mid-April to late June, consumption has stayed relatively flat in the past two months and remains well below its pre-pandemic levels, government data show. The fizzling rebound highlights the lingering effects of coronavirus precautions and travel restrictions. Even as some states advance business reopening plans, rising cases in other parts of the country are fueling caution among consumers.” (WALL STREET JOURNAL)

Complicated Saga: “The head of South Korean electronics conglomerate Samsung has been indicted of fraud and stock price manipulation stemming from a 2015 merger. The indictment of [Lee Jae-yong] is the latest step in a complicated saga as prosecutors continue to press their case that he and other executives illegally orchestrated the merger of two Samsung subsidiaries in order to grant him more control over the company.” (WALL STREET JOURNAL)


Daily U.S. Covid-19 cases have dropped below 34,000 nationwide, the lowest since Mid-June.

Tesla plans to unload as much as $5 billion in shares, capitalizing on its price increase following its recent stock split.

LinkedIn founder Reid Hoffman and Zynga founder Mark Pincus are forming a SPAC with plans to raise $600 million and acquire a late-stage technology business.

Mobile e-commerce platform Wish has confidentially filed to go public and was valued as high as $11.2 billion a year ago.

Facebook is threatening to block the sharing of news stories in Australia if the government enforces legislation mandating internet platforms to pay media companies for their content.

ByteDance founder Zhang Yiming is having second thoughts about selling TikTok to a U.S. buyer following China’s new trade regulations that could complicate the transfer of technology overseas.

American Airlines and Delta Air Lines announced they were walking back change and cancellation fees on most domestic flights as decreased demand reshapes the “competitive battleground among airlines.”
“Factories in Asia and Europe are slowly recovering from the sharp falls in output that accompanied lockdowns designed to contain the novel coronavirus, but continue to cut jobs in the face of an uncertain outlook.”

A Couple Cents Featured

More video content coming this week. But until then, let’s jump back a few weeks to Justin Oh’s breakdown of Microsoft and TikTok.
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