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Amazon Splits HQ2 Between New York and Virginia, Creates Jobs

Zacks Equity Research
Updated

Amazon AMZN ended its year-long search for cities to build its HQ2. The company has selected Long Island City, NY and Arlington, VA for building its new headquarters.

On completion of these headquarters, Amazon will have three headquarters in the United States including its first one in Seattle.

As part of the latest move, the e-commerce giant has decided to invest $5 billion in the development of the new offices. Further, the company will also be benefiting the society by creating several jobs.

The company intends to create more than 25,000 jobs in each of the areas, in turn expanding its employee base. Notably, Amazon has more than 610K employees globally and more than 250K employees in North America alone. The sheer numbers make Amazon a massive force in employment.

Further, both the regions will have a 4 million square feet of energy-efficient office space.

Additionally, the job creation and investment by Amazon are likely to generate massive tax revenues in New York as well as Arlington. The estimated figure for the incremental tax revenue is projected to be more than $10 billion and $3.2 billion over the next 20 years, respectively.

Benefits from the Initiative

We believe job creation will add efficiency to its production and operations by bringing more talent and expertise to the company. This will aid business growth of Amazon.

Reportedly, New York reached 128,600 of tech employment last year and is often considered the hub of talent. Consequently, inaugurating headquarter in the city is likely to be a major positive for Amazon.

Further, this will help the company to earn performance-based direct incentives of $1.525 billion and $573 million in New York and Arlington, respectively.

Moreover, there will be tax benefits of up to $1.2 billion in the New York since the company abides by its decision regarding job creation and job value.

All these benefits are likely to add value to the company and aid performance of its business model.

Coming to the price performance, shares of Amazon have returned 62.4% on a year-to-date basis, outperforming the industry’s rally of 30%.



Strengthening Competition

Amazon’s competitive position is likely to improve with its office expansion in New York against Alphabet’s GOOGL division Google.

Notably, the search giant is leaving no stone unturned to bolster presence in the city on the back of its office expansion. Reportedly, the company has announced its plans to double talent hiring in the city over the next decade in order to expand employee base.

Further, Google recently closed the deal for a 1.3 million- square-foot office building at St. John’s Terminal in the city’s West Village neighborhood which is expected to accommodate its 8,500 employees.

Further, the company is aggressively looking into expansion of its Chelsea Market property by about 300,000 square feet.

Nevertheless, Amazon is way ahead of Google as it is establishing its next U.S. headquarter in the city. Also, its expected employee strength is significantly more than that of Google’s expected strength of 14K.

Zacks Rank & Stocks to Consider

Currently, Amazon carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are TripAdvisor TRIP and Adobe Systems ADBE. While TripAdvisor sports a Zacks Rank #1 (Strong Buy), Adobe Systems carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for TripAdvisor and Adobe Systems is pegged at 16.05% and 16.4%, respectively.

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