Bank Of America: Regulations May Limit Amazon Drone's Widespread Adoption

Bank of America issued a company update on Amazon.com, Inc. AMZN after the Federal Aviation Administration (FAA) issued Amazon an experimental airworthiness certificate to test drone delivery. Amazon is rated as a Buy with a $400 price target. Analysts Justin Post and Paul Bieber wrote, "The FAA approval does not allow Amazon to test autonomous drone delivery, which we think is Amazon's ultimate long term goal for delivery. While drone delivery is garnering a lot of attention, it may be years before line of site provisions change (if ever), and drones need a place to land, which could limit their opportunity in metro areas." While there is excitement that the FAA approved the use of drone delivery, the conditions under which Amazon can test drone delivery severely limit the scope of the testing process. The FAA stipulated that tests must be performed below 400 ft. during the day, and the drone operator, who must have a pilot's license, must have line of site control of the drone. This will make the widespread use of drone for delivery difficult for the online retailer. Amazon closed Friday at $378.49.