Last week, investors learned that tech giant Amazon (NASDAQ:AMZN) would potentially be offering free or low-cost mobile services to Prime members in the U.S. The company is targeting wireless plans of $10 per month or less. The low-cost plans could put a dent in the sales of major telecom providers. Shares of both AT&T (NYSE:T) and Verizon Communications (NYSE:VZ) were down on Friday on the news.
However, it's far too early for investors to worry about the threat from Amazon. This is a company that over the years has dabbled into other industries but never really dominated them. It has been nearly six years, for example, since it acquired grocery chain Whole Foods. And despite Amazon's deep pockets, it hasn't been able to transform that into a chain that can rival the large grocery operators. It has also gotten into healthcare and offered its own telehealth service in 2019, which it ended up abandoning a few years later.
E-commerce remains Amazon's core business and that's not likely to change. While it may cause some minor disruption in other industries, odds are it isn't about to become a major telecom provider or dominant grocer chain owner, as the costs and investment that would be required to do so would put more pressure on its already thin profit margin.
With investor fears rising on AT&T and Verizon, now may actually be a good time to buy these stocks as these concerns are likely overblown. These are still top names in telecom and that isn't likely to change, even if Amazon does end up offering low-cost mobile services.
