Analysis: AMZN WMT KR COST

Amazon (AMZN) is at it again. On Friday afternoon, The Wall Street Journal reported that Amazon is planning to open grocery stores across the country, but not ones under the Whole Foods brand. Instead, the stores are expected to operate under a new brand with a lower price point, much different from the higher priced, Whole Foods supermarket chain that doesn't sell products with artificial colors, flavors, preservatives, sweeteners, and hydrogenated fats.

A source told the Journal that the company plans to open its first store in Los Angeles, and this store could open as early as the end of this year. Also, one person told the W that Amazon has interest in opening stores in major U.S. cities like San Francisco, Seattle, Chicago, Washington, D.C., and Philadelphia. According to the report, Amazon is also interested in acquiring regional grocery chains to boost its supermarket brand, a source said.

Grocery delivery is starting to become more mainstream, but there are inherent economic challenges in its business model. It can be costly to ship fresh produce in a timely manner, and most importantly, keep it fresh. But grocery pickup on the other hand, that might be more lucrative. Speaking on the Amazon headline, analysts at Keybanc said in a note, "We think this serves as a tactic acknowledgement that the traditional e-commerce grocery delivery model of bags/boxes on doorsteps is not economically sustainable for many areas in the country." The analysts think Walmart (WMT) already has a competitive advantage in this space, but Amazon "could take share from under-performing regional grocery chains and that WMT can continue to gain grocery share even in that environment."

After this news was reported, AMZN extended its daily gains while grocery-store stocks like Kroger (KR) , Costco (COST) , and WMT dipped.

Reports like this are why you invest in Amazon. They are constantly looking for ways to innovate, disrupt, and bring value to the U.S. consumer. Although the plans for these new stores are still pretty unclear, more locations across the country means a greater physical footprint for the company. Leveraging this, Amazon could turn unused space within each store and make them act like a miniature "distribution center" aimed at reducing shipping costs and travel time for their entire powerful e-commerce business, not just grocery. This is something to keep in the back of your head whenever Amazon is in the headlines.

On a separate note, Jim interviewed Amazon Web Services CEO Andy Jassy on Thursday's episode of "Mad Money". The full interview can be found on the site here.

If you are unfamiliar with Amazon Web Services and have missed our quarterly analysis on this exciting business, which would be number 119 on the Fortune 500 list if it were a standalone company, then we highly recommend you watch the interview where Jassy explains how AWS wins through price leadership and a commitment to customers.