Amazon: Teamsters Strike Unlikely to Have Meaningful Impact

Key Morningstar Metrics for Amazon

• Fair Value Estimate: $200.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

We do not expect a material impact on Amazon’s AMZN e-commerce operations after thousands of workers went on strike on Dec. 19. The shares are up modestly intraday, reinforcing the notion that this is not likely to have a negative impact. Amazon continues to drive efficiencies throughout its network, which helps lower costs and improve delivery speeds, ultimately increasing purchases by Prime members. Our fair value estimate remains at $200 per share, leaving the stock overvalued, in our view.

Shares of nearly all companies in our narrow software coverage have been strong since September, on expectations for interest rate cuts by the Federal Reserve. Fundamentals have not changed. While we have not changed our discount rate, a 100-basis-point reduction would result in a fair value estimate increase of at least 20%.

At the time of writing, the strike involved seven facilities in New York, California, Illinois, and Georgia. We view this as part of a long-running dispute between Amazon and the Teamsters Union, which seemingly chose the days leading up to Christmas to strike to inflict maximum discomfort on consumers. Amazon employs more than 1.5 million people globally, the vast majority of whom are involved in warehouse and delivery. Approximately 1% are represented by unions. Amazon increased wages for warehouse and delivery employees in September by about 7%. These employees are eligible for typical benefits, including healthcare and 401(k) plans.

The company does not recognize the Teamsters Union as representing any of its workers. The Teamsters have been trying to unionize Amazon for years. Amazon has objected to at least one successful unionization vote in the United States, alleging National Labor Relations Board bias, and sued in federal court to challenge the constitutionality of the NLRB itself. We think unionization is generally bad for the firm, as the process tends to increase wages and reduce efficiency.