Why I’m Bullish on Amazon Stock
Attend any tech event, and you’ll hear a lot of talk about the “Internet of Things” (IoT). But while they’ve been talking, Amazon.com, Inc. (NASDAQ:AMZN) has been doing. It’s now clear that AMZN stock could be the best play in the future of IoT.
From where I’m standing, it looks like there are only three major tech stocks in the running: (Google) Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), and Amazon stock. Internal politics between Google’s core staff and the folks in charge of IoT (Nest) make the search giant a non-factor in this competition. But Apple poses a more serious challenge.
Apple locks customers into their ecosystem, and that gives them power. They can nudge consumers into a whole range of new products, leading to higher profits and ultimately a surging stock price. Nonetheless, I would bet on AMZN stock in this race. Before I explain why, I should first answer this pressing question: What is the Internet of Things?
For those unfamiliar with IoT, it is an emerging industry which aims to “digitize the home.” Think about surfing the Internet on your smart TV, or controlling that TV using your smartphone. Both of those things are early examples of IoT technology. Amazon stock is a bet that we’ll soon have similar capabilities for other household items.
For instance, there are IoT-enabled thermostats which you can control from your smartphone. Why would anyone want that, you ask? Imagine going ice skating in the middle of December. Before leaving, you turn down the thermostat to save on energy costs, but now you and your friends are headed back inside. With a few taps on your smartphone, the thermostat can warm up the house so it’s toasty as you walk through the door. You save money while gaining flexibility.
Why would anyone not do that?
Amazon Stock Has a “Secret Sauce”
Now that we’ve brushed up on the basics, it’s time to lay out my case for Amazon stock. Warning: this may sound a little far-fetched if you’ve never heard of the “Amazon Echo.”
In a nutshell, the Amazon is using voice-recognition software as a platform for IoT products. You need to understand that one fact in order to grasp why AMZN stock is poised for massive gains.
Rather than keeping the Internet as something we only access through screens (laptops, PCs, tablets, smartphones), Amazon wants to make it accessible through voice. They want you to be able to issue spoken commands to your devices, because that’s how people naturally communicate. It’s a genius move for AMZN stock.
We generally prefer talking over typing; sounds over words; music over books. If you doubt that, just ask people to count the number of celebrity musicians you can name off the top of your head, then ask them to name as many writers. Most people won’t be able to.
Amazon understands this, and so does Apple. Remember “Siri,” which was Apple’s lame attempt at voice-recognition software? It was really an attempt to build the first platform controlled by voice. Amazon has built a similar software called “Alexa,” except it is far more accurate. “Siri” was always misunderstanding what users were saying, which often led to hilarious responses.
“Alexa” is far better at listening. Let me give you an example. Amazon Echo was the company’s first IoT product. At first it looked like an ordinary speaker that played music or podcasts, but—to borrow a cliché—looks can be deceiving. You can ask the Echo questions, order things off Amazon.com, or get it to read you the news. Even if it is playing music, the Echo can still hear new commands.
Consumers loved it. Although we don’t have official sales figures, the Echo shot to the top of Amazon’s best-seller list. In fact, it was so successful that Amazon released even more IoT devices, like the Amazon “Echo Dot” and the “Amazon Tap.” Piece by piece, Amazon is building a bridge between the digital world and real world.
The company is racing ahead of Apple in terms of voice-controlled devices, which many analysts (myself included) think is the next big platform. The stakes are huge. Amazon stock could become the first $1.0-trillion company if it maintains this lead, so stay alert.
This opportunity isn’t around the corner. It’s already here.
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