New York famously passed on Amazon.com, Inc.'s (AMZN) second headquarters (HQ2) two years ago. I remember hoping that the company would make a home in the city. It didn't happen. But is Amazon back to the Big Apple in spite of that? The answer is maybe, kind-of, sort-of.
On Feb. 8, 2019, The Washington Post (owned by Jeff Bezos) reported that Amazon was reconsidering its plans for an NYC headquarters. On Valentine's Day, six days later, the company announced that it was abandoning the project because: "a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project."
- Amazon wasn't able to come to terms on a second headquarters in New York City.
- It is possible that a lighter presence in NYC is shaping up.
- The stock is still a long-term Big Money favorite.
Politics became the ultimate undoing. New York lawmakers decided that it wasn't worth the $3 billion of state and city incentives that the company would receive to set up shop in Long Island City. It seemed short-sighted when then Governor Cuomo's office said it expected that Amazon would have brought $27.5 billion in tax revenue over 25 years: $14 billion to the state and $13.5 billion to the city. That would have been $9 additional tax dollars for each $1 of incentive. What's $27 billion anyway? It's only money!
The ripple effect was huge for New York City. First and foremost, the juicy tax revenue was now lost forever. Secondly, it meant that anywhere from 25,000 to 40,000 new jobs evaporated too. The spill-over into the local economy was gone. Imagine being a local restaurant owner and finding out that this plan got derailed by your local politician?
Of course, there were big investment bets made on real estate and business in anticipation of the move. Rents were anticipated to skyrocket, so property investors who got duped were probably hurt badly.
Well, now a watered-down version of the debate may resurface. Amazon is in talks to sublease offices from JPMorgan Chase & Co.'s (JPMC) 2015 tech hub building. The 400,000-square-foot space in Hudson Yards offered up nearly 25% for sublease.
Of course, this news pales in comparison with the scuttled Queens HQ2. But it is significant in the aggregate, as Bloomberg reports:
- Amazon already has offices near the tower in Hudson Yards with a lease signed in 2017.
- Amazon bought the iconic Lord & Taylor's building last year with a plan to add 2,000 or more jobs.
- In December 2019, Amazon signed a lease for 335,000 square feet on 10th Avenue—close to the Hudson Yards offices as well.
It sneakily resembles the way Amazon does its business: gradually then suddenly. The company slowly and painstakingly built itself into the colossal online retail giant. It weathered years of ridicule and unprofitability to become the name on everyone's lips. Along the way, Amazon planted seeds of other businesses that are now becoming giants in their own right. I am thinking of its cloud computing business Amazon Web Services (AWS), Amazon Prime, and its media business with the recently purchased MGM studios.
Doesn't it stand to reason that, if Amazon wanted an NYC Headquarters and politicians kiboshed it, the company would get even somehow? The first thought is that the company got even by opening Amazon HQ2 in Arlington, Virginia. While this is true, as noted above, Amazon is quietly mopping up real estate in New York anyway. And who says Amazon can't have an HQ3—even if not in name?
Amazon does things its own way. How else do you get to become a $1.67 trillion company? In other words, if Amazon wants an HQ-like presence in NYC, don't count it out.
Here's why I am telling you this: the latest headlines are doing their job. News is here to entertain us. They make money through advertising. If there are no eyeballs on ads, there is no revenue. Needless to say, that's bad for business. Simple as that.
So, when I want to see if there's meat to a news story, I look to what Big Money investors think of the companies it may affect. In short, the whole HQ2 New York fiasco concluded right before lockdown really smoked the New York economy and real estate market. It optically looks like a nice miss for Amazon and a big loss for New York.
But let's shift to the Big Money picture. The stock keeps trucking higher over time. Amazon recently experienced an earnings disappointment, but my guess is that the impact will be short lived.
Below we see the MAPsignals Big Money signals. As you can see, in the past 90 days, Amazon stock saw big buy activity four times. But I still like to look at fundamentals too, and Amazon has been growing nicely. Highly ranked stocks show up as a Top 20 stock, and AMZN has made that signal 32 times since 2014:
Stocks that have lots of Big Money buying and solid fundamentals tend to head higher over time. And that sums up Amazon, an outlier stock. I've marked some of those instances below so you can follow along with me. You can also see that the accumulation line has been increasing, reinforcing long-term buying.
The Bottom Line
I've been a long-term supporter of Amazon’s stock. I still believe in the company's long-term vision.
While the company didn't land a deal for an NYC HQ, we can all dream, right? Amazon found a home in Virginia. Does this mean NYC is quietly becoming HQ3? From the way Amazon has developed its business into many successful tentacles, I wouldn't rule it out.
Disclosure: The author holds no position in AMZN at the time of publication.