Three Tailwinds for AMZN Stock
Amazon.com, Inc. (NASDAQ:AMZN) is what I like to call a “market bulldozer.” Like a tractor clearing fields for new crops, Amazon digs its claws into a market and shreds every rival in sight. By the end, the soil is fertile for growth in AMZN stock.
Time and again, Amazon has completely taken over industries that were considered untouchable. For instance, two of its earliest conquests were retail and books. Both industries already had giant companies with tons of market power, but it didn’t matter. Amazon still took control. Brick-and-mortar companies dropped like flies.
One of Amazon’s recent victims was Sports Authority, the giant sportswear retailer. It fell into bankruptcy as AMZN stock shot through the roof.
Even Wal-Mart Stores, Inc., the ultimate powerhouse in brick-and-mortar retail, slowly lost ground to Amazon. Last year, it officially became the second biggest U.S. retailer by market capitalization. AMZN stock had blown past, leaving everyone else to eat its dust.
Then there’s the book industry, where Amazon crushed booksellers. As someone who works in the publishing industry, I can tell you it wasn’t pretty to watch. The traditional publishers didn’t think Amazon was much of a threat.
They couldn’t have been more wrong. Amazon ate their lunch by selling books at razor-thin margins, and developing a stunningly efficient delivery system. I honestly receive most of my packages from Amazon ahead of schedule.
Compare that with the U.S. Postal Service.
What’s truly amazing is that Amazon wasn’t a one-hit wonder. It can replicate its success in almost any industry. That’s why it is a “market bulldozer.”
Here are three markets that Amazon is likely to dominate in the years to come:
Amazon recently unveiled a platform called “Amazon Inspire.” It’s basically a giant gift bag of resources for teachers and school administrators. They can simply type what they need into a search bar, or access peer reviews for different digital teaching materials. Any member can upload material they find interesting to keep building the library of resources. It’s a great program for helping America’s education system, but it could also play a supporting role in Amazon’s bottom line. Analysts have estimated that the market for education technology could reach $19.0 billion within the next 30 months. By launching now, Amazon can bulldoze its way to a major slice of that market. (Source: “Announcing Amazon Inspire, a Free Service for Digital Educational Resources,” Fortune, June 27, 2016.)
E-Commerce in India
For the most part of Amazon’s history, the U.S. market has driven its growth. The U.S. market is 350 million strong, but its population is aging. Older generations tend not to be as Internet-friendly as younger generations, nor are they as open to online shopping. But Amazon thrived off that 350-million-person market. Now it’s making inroads into the Indian market, which has 1.27 billion potential customers. This massive opportunity will be worth $120 billion by 2020. Although Amazon faces some competition from local companies like Flipkart and Snapdeal, it has surpassed them in web traffic on both desktop and mobile. The company also poured in $3.0 billion of additional funding to its India operations as the competition struggles to find more cash. It could win this war by simply being the last company standing. Needless to say, winning this market could lock in massive gains for AMZN stock. (Source: “Amazon Tops Indian E-Commerce Market In Web Traffic,” Forbes, June 27, 2016.)
If you haven’t seen an “Amazon Echo” yet, please come out from that cave. It must be dark in there. Seriously, there hasn’t yet been a device like this on the market. It is a cylindrical speaker that operates through voice commands. Doesn’t sound that special, right? Well, it’s more the smoothness of the product that sets it apart. Whether or not the speaker is playing music, it can hear you issue a command. It can answer questions, take notes, and issue reminders. This is the first “robot assistant” within the home. It is constantly getting updates to increase the functionality, but the main takeaway is that Amazon has opened up an entirely new market. Forget the smartwatches and other wearable tech nonsense. This is the next “iPhone.”
Critics say that Amazon stock is overvalued, but they are always looking backwards. They measure the company against its past accomplishments instead of looking forward. I see Amazon as the “market bulldozer” capable of razing these three emerging industries. From that vantage point, the potential of AMZN stock seems unlimited.