Amazon can alter the course of history for these 7 companies

  • Wall Street is looking for new ways to cash in on Amazon‘s meteoric rise.
  • Amazon’s stock has grown over 50% in the past year and is now trading at $US1,146.19 a share.
  • Investors can benefit from investing in companies whose revenue is tied to Amazon.
  • Track Amazon’s stock price moves here.

While much attention is paid to the companies and industries Amazon disrupts, the online retailer has also boosted many that are tied to its massive ecosystem.

Amazon is a $US545 billion tech titan that keeps on giving. Its stock has gained more than 50% over the past year, and it now trades at $US1,146.19 a share.

While some investor portfolios rely heavily on the company, there are ways to diversify without losing out on the company’s high-flying performance. According to BMO Capital Markets’ Brian Belski, investors can look at other companies tied to Amazon as a way to continue banking on its dominance.

But as Amazon expands its footprint into the retail market, it is starting to develop its own infrastructure and suppliers. The company’s massive growth and scale have allowed it to sell items at deep discounts and cut out middlemen.

It has hurt booksellers, such as Hatchette, and circumvented employing Chinese workers who move cargo to seaports for ocean shipping in favour of its own in-house workers, according to reports by The Wall Street Journal. The company has also reduced its dependence on FedEx,UPS, and the US Postal Service in favour of its own branded cargo planes.

While Amazon works with these companies right now, it might just be a matter of time before it squeezes them out too.

Business Insider found seven firms whose fortunes could be largely affected by Amazon’s path forward.


PayPal

Ticker:PYPL

Relation to Amazon: Credit & Payment Card Provider

Year-t0-date stock performance: +93.34%

Amazon partners with several credit card and payment processing companies, including PayPal, for its online transactions. While PayPal is able to collect a fee from all of these transactions, the Bernstein analyst Lisa Ellis says their relationship is on the rocks as Amazon moves forward with its own payment offerings.


Applied Optoelectronics

Ticker: AAOI

Relation to Amazon: Fibre-optic Network Provider

Year-t0-date stock performance: +85.22%

Applied Optoelectronics’ largest customer is Amazon. The company derived 47% of its revenue from Amazon in its second quarter but only 10% in its third quarter. The company said it expected Amazon to continue to reduce orders for its components because of Amazon’s technology shift from 40G to the faster 100G transceivers.

“We continue to have ongoing discussions with this customer and based on those conversations, we believe the disruption in order flow is related to the ongoing transition from 40G to 100G and not specific to AOI,” Stefan Murry, the chief financial officer of Applied Optoelectronics, said on an earnings call.


MasterCard

Ticker: MA

Relation to Amazon: Credit & Payment Card Provider

Year-t0-date stock performance: +46.95%

Amazon partners with several credit card and payment processing companies, including MasterCard, for its online transactions. MasterCard collects fees from all of these transactions. The Bernstein analyst Lisa Ellis, however, sees a strained relationship as Amazon moves forward with its own payment offerings.


Visa

Ticker: V

Relation to Amazon: Credit & Payment Card Provider

Year-t0-date stock performance: +42.81%

Amazon partners with several credit card and payment processing companies, including Visa, for its online transactions. Visa, like other payment services, makes money off of the fees from all of these transactions. However, the Bernstein analyst Lisa Ellis sees a fickle relationship as Amazon moves forward with its own payment offerings.


Prologis

Ticker: PLD

Relation to Amazon: Amazon Fulfillment Landlord

Year-t0-date stock performance: +26.31%

Prologis’ largest tenant is Amazon and, conversely, it is the tech giant’s largest landlord. Amazon occupies roughly 16 million square feet of space and pays 3.1% of net effective rent, roughly 50% more than Prologis’ next largest tenant, DHL, according to Prologis’ financial statements.


International Paper

Ticker: IP

Relation to Amazon: Cardboard Box Supplier

Year-t0-date stock performance: +4.08%

International Paper supplies roughly half of the cardboard boxes Amazon uses to package and deliver its items. Though IP does not report how much of its revenue goes to Amazon, analysts estimate that it can be 6% to 7% of its total sales, according to a report by Barron’s.


Juniper Networks

Ticker: JNPR

Relation to Amazon: Telecommunications & Network Provider

Year-t0-date stock performance: -1.36%

Juniper Networks provides the network service and support for Amazon Web Services, the cloud unit of Amazon. According to the UBS analyst Steven Milunovich, weak demand from Amazon may have caused Juniper’s earnings upset in the third quarter.

“Our industry contacts tell us AWS is changing its data center architecture,” Milunovich wrote in a note. “We believe this change could be creating softness in AWS spend on Juniper.”


SEE ALSO:

The 3 best ways to trade Amazon’s retail dominance

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