Retail

9 American Businesses That Amazon and Jeff Bezos Will Never Target

Jon C. Ogg

Published: July 11, 2017 2:00 pm

Last Updated: January 12, 2020 10:15 am

It is no secret that Amazon Prime Day is a big deal in retail. It may not be a new Valentine’s Day, but it is certainly yet another non-Amazon retail wrecker of a day. Many investors have tried and tried to figure out which companies can withstand Amazon.com Inc.’s (NASDAQ: AMZN) e-commerce onslaught. The web giant’s tentacles are almost everywhere, even in making its own consumer electronics, making its own private label consumer goods, online food ordering, and now Jeff Bezos is getting into organic groceries with the pending acquisition of Whole Foods Market Inc. (NASDAQ: WFM).

24/7 Wall St. has tried to consider companies and industries that are likely immune to the endless growth ambitions of Amazon. Some ideas have been promoted by Wall Street and some are original views. In order to qualify, a company has to touch millions of Americans every year. It also has to be implausible that Bezos would ever want to get into an industry or go after a company’s business segment.

While Best Buy Co. Inc. (NYSE: BBY) had fought back from being called Amazon’s showroom, now Amazon is looking to compete against Best Buy‘s Geek Squad. Costco Wholesale Corp. (NASDAQ: COST) had withstood the Amazon-ing of its business, but Costco may now be its next target. And Kroger Co. (NYSE: KR) and myriad big brand food companies might have some serious competition for already low margins now that Amazon is going after Whole Foods. Amazon is now even a big risk to the retail auto parts industry.

Again, picking consumer-focused companies immune to the mighty Amazon is no simple feat at this time. Amazon has massive knowledge about consumer behavior, not just from shopping habits but also from collecting cookies and viewing referral and landing pages after its customers leave the Amazon site. And Bezos seems to be awake all hours thinking of new industries that he can wreck. Even Amazon Restaurants has to be considered as disruption to a business model, even if it could actually be viewed as a win for some restaurants.

24/7 Wall St. looked at the consumer-facing companies, again those that serve millions of people per year. With news of Amazon’s brick-and-mortar stores, there has been talk and real progress over how Amazon could disrupt or enter much more targeted apparel, pet products, pharmacies, consumer goods, consumer staples, and so many other retail and consumer facing businesses. And with an Amazon Prime angle, there are many more aspects that the company can tackle at the expense of great American companies and industries.

To qualify as immune to Amazon, a company had to already have a market value in the multibillion range (all are larger). Each company had to have a fairly wide moat against a competitor deciding to open up next door or down the street, and each company needed to even have a defensible moat against emerging competition that Amazon Web Services might not easily disrupt with a far cheaper business model. Each company also had to have a solid track record and still had to have global room for growth. And finally, each Amazon-immune outfit had to have a Thomson Reuters consensus analyst target price that was higher than the current share price.

American Water Works Co. Inc. (NYSE: AWK) is the largest water utility in the United States, delivering water to over 1,600 communities and about 15 million people. You can have deregulation threats in electricity, but it is hard to get “competing water utilities” to households and businesses. Even if you get bottled water delivery, it eventually becomes cheaper to install your own water filters. And Amazon won’t be delivering your daily shower and multiple daily toilet flushes any time soon. Water has been immune to outside pressures as it is hard to replace that infrastructure even if a municipality opts for alternative water sources. At $77.75 a share, American Water has a 2.1% dividend yield, and its consensus target price is $84.50.

Carnival Corp. (NYSE: CCL) is the top cruise operator in the world. Even if Amazon gets into pricing of travel for referrals, Carnival has the right price points for travelers and it is the largest of them all. It claims to have almost half of the global cruising market share, with annual customers of 11.5 million and more than 225,000 people on any given day. Carnival’s fleet of about 100 ships has another 19 slated for delivery over the next five years. Carnival investors receive a 2.45% dividend, and with shares trading close to $65, the Wall Street consensus price target is $67.50.

Cedar Fair L.P. (NYSE: FUN) owns and operates 11 theme parks and has water parks and five hotels. Unlike Disney and Universal, Cedar Fair owns no TV and cable networks and is not a maker of movies, nor is too worried about merchandise sales disappearing. An overwhelming majority of sales are at the theme parks, and it has had record-breaking results. Six Flags is also within Cedar Fair’s realm of being anti-Amazon-targeting. It seems worthwhile to point out that as virtual reality become virtually more real that theme parks might lose some of their at-the-margin customers, but there are some things in real life that can’t be as fun virtually. At $68.50 a share, Cedar Fair has a 4.9% dividend yield, and its consensus target price is up above $77.

Dave & Buster’s Entertainment Inc. (NASDAQ: PLAY) is a top destination for entertainment and dining, for adults and families alike. There are food and beverages for kids and adults, and on top of video games galore they have live sports viewing venues. As of June 2017, Dave & Buster’s had only 99 stores in North America, and the company sees a path to reaching more than 200 stores ahead. Its shares recently traded at $65.00, with a consensus price target of $78.25. The stock has no dividend to fund its ongoing growth, but it does have an expanded share buyback plan it can use as a return of capital to shareholders.

Dunkin’ Brands Group Inc. (NASDAQ: DNKN) has the Dunkin’ Donuts and Baskin-Robbins brands, both of which are at-the-moment for consumer demand. Maybe ice cream and donuts can be delivered down the road, but the price point (even thinking about future drone delivery and Amazon Eats) seems a stretch that its growth potential remains large. Dunkin’ shareholders receive 2.35% dividend yield, and the $53.90 share price compares with a consensus price target of $55.95.

McDonald’s Corp. (NYSE: MCD) probably isn’t too worried about Amazon getting into a franchise fast-food chain business model. The world’s largest global food service retailer by value, and its 36,000 or so locations in over 100 countries is only behind the nearly 45,000 global franchise locations of Subway. McDonald’s also has come roaring back after a turnaround due to all-day breakfast and other initiatives. With shares at $154.00, its investors receive a 2.4% dividend yield, and the consensus target price is $158.60.

Starbucks Corp. (NASDAQ: SBUX) is the king of global coffee and super-fast casual beverages and food. Perhaps the grocery store model disruption could be a small risk, but the Starbucks primary model of owning and licensing chain stores is now more than 25,000 and growing. Starbucks now pays its shareholders a 1.7% dividend yield, and its $57.80 share price compares with a $66.52 consensus analyst target.

Waste Management Inc. (NYSE: WM) is in the lovely business of waste management, servicing cities, consumers and businesses. On top of just collecting trash, it has recycling and landfills that have to be considered. The former is becoming nearly impossible to get legal permits for due to environmental concerns. Still, humans create a lot of trash, and that trash ultimately has to go somewhere. There is even an argument to be made that Waste Management and its rivals could be forced to raise prices on the consumer side due to endless numbers of packages and goods being shipped to homes and businesses. At $73.70 a share, Waste Management pays a 2.3% dividend yield, and it has a consensus target price of $78.40. Rival junkyard dog Republic Services also has little to fear from Bezos.

Wynn Resorts Ltd. (NASDAQ: WYNN) may not be immune to economic sensitivity, but it seems very unlikely that Bezos wants to go into owning luxury hotel and casino properties in Las Vegas and Macau, and Wynn has an upcoming hotel in Massachusetts. The company wins from food, gambling, entertainment venues and hotels, all of which have yet to feel any real impact from the likes of HomeAway and Airbnb. Steve Wynn has built an empire that is more upscale than most casinos as well. It also seems unlikely that Bezos would want the regulations tied to casinos and gambling, even in an online future. At $134.00 a share, Wynn pays investors a 1.5% yield. The consensus target price is now above $136.