Alison Porter, co-manager of Janus Henderson Global Technology Fund (GB0007716078), explains why the recent surge in demand for US tech company's Amazon.com's (AMZN:NSQ) services should benefit the company long beyond the coronavirus outbreak.
“Amazon [recently] announced that it was adding 100,000 jobs and raising hourly wages in the US,” said Ms Porter. “The escalation of the coronavirus has meant surging demand for online delivery of groceries and household products. This is seasonally a period when Amazon would typically shed temporary workers after the Christmas holiday surge, but the volume of demand has left Amazon extending hours available to work and raising hourly rates to try and fulfil [demand].
“Amazon [also] saw record numbers of sign-ups to its Amazon Prime programme in the fourth quarter of 2019 driven by its push to one day delivery and the expansion of Amazon Prime video to include sports, as well its ongoing expansion into food with the acquisition of Wholefoods. Even [with] heavy investment in 2019 to expand and improve delivery infrastructure, the company could not have anticipated this type of surge in demand.
“Amazon is hiring incrementally, but also has to balance this with the health and safety of all its employees and ensuring that appropriate quarantine and sick pay is provided. At this time, online delivery is becoming an essential service for the elderly and those self-isolating, and [more popular] with the widespread introduction of social-distancing.
"The Amazon Web Service division, meanwhile, provides cloud infrastructure that will support the surging needs of workers at home. [Although we hope that] this recent surge in demand will prove temporary as fears and cases abate, we also believe that there will be a long term benefit to the company in that new habits will be established and new customers to the service will be acquired.”
Amazon.com was one of Janus Henderson Global Technology Fund’s 10 largest holdings at the end of February, accounting for 3.12 per cent of its assets.
