Summary

• Amazon has had an exhilarating year with the stock more than doubling since January.
• Amazon is expected topple Macy’s as the No. 1 U.S. apparel retailer by 2017.
• Exerting themselves in the Internet of Things market.
• Analyst unanimously recommend investing bullishly in AMZN stocks.
• I Know First’s algorithmic forecast is bullish in the long-run too.

After a rough 2014, Amazon.com, Inc. (NASDAQ:AMZN) has had an electrifying year. Their stock has more than doubled since January and made the founder and CEO, Jeff Bezos, the third- richest American.

(Yahoo! Finance)

Not resting on their laurels, Amazon is laying the foundations for additional success and breaking their records further. Through reinforcing their footholds in Amazon’s traditional markets and making ventures into non-traditional Amazon markets, such as clothes and the Internet of Things, Amazon is vocally demonstrating that their potential have not been maxed out and the company is set to expand much further.

Clothing Line

Amazon already puts its brand name on e-readers, streaming television devices and Kindle tablets. It also has an entire segment of products branded “Amazon Basics” which consist of everything from home appliances to pet supplies. Basics, offers customers a fair-priced deal on products which consumers can trust – as Amazon has put their name behind it. Quite often, Amazon has an offered an item in Basics line which then forces manufacturers to lower prices. Similarly, the threat of Amazon starting its own products line causes companies to either sell their products via Amazon or lower their prices. Basics thereby gives Amazon leverage it can use to make enhanced deals, keeps companies honest and is used as a bargaining chip to push reluctant brand to the negotiating table. That is precisely the tactic, the company appears to be taking as it deliberates entering the fashion industry.

(www.technewstoday.com)

In a report from the WWD Apparel and Retail Summit on Oct 27th, Amazon Fashion VP Jeff Yurcisin stated that, “For Amazon, we know our customers love brands, many of the brands in this room … and that’s where the lion’s share of our business comes from… When we see gaps, when certain brands have actually decided for their own reasons not to sell with us, our customer still wants a product like that. Amazon may get into private-label for those kinds of goods.” This may be viewed as a promise or threat, but either way, Amazon is likely to have raised some alarm bells in the clothing industry.

In July, Amazon sponsored New York Fashion Week for Men and has recently started selling higher-end brands including Levi’s Calvin Klein and Steve Madden thus expanding its clothing line to high fashion too. Whether by making its own clothes or via bringing in new partners in high-end fashion, Amazon’s colossal customer base and respected brand name is predicted to transform the retail industry. Indeed, Cowen & Co recently downgraded Macy’s (NYSE: M) explaining that, “As Amazon grows in scale, we see risk to M’s incumbency as the US’s largest retailer impacting both top-line sales as well as purchasing power with vendors”.

Internet of Things

There are several of big name companies fighting to become the ecosystem provider for connected smart devices – as Microsoft (MSFT) did with PCs and Apple (AAPL) did for mobile phones. The chart below demonstrates that the Internet of Things (IoT) is still in the primary “Innovative Trigger” phase of the latest “Hype Cycle”. Quite significantly, the charts makers Gartner (NYSE: IT), estimate that the battle for dominance over the IoT sector has still another five to ten years to play out.

(Gartner, Inc)

Amazon’s prior experimentations with IoT are well known, such as the Dash Button, which automatically reorders ones houseware, healthcare and pet supplies.

However in October, Amazon went a step further by announcing a new partnership initiative to create an IoT platform where significant supply-chain, hardware and semiconductor companies, such as Intel (INTC) and Microchip (MCHP), were allowed access to cloud-based Amazon Web Services (AWS) and its processor. This is much bigger and bolder and will open the realm of the IoT to the mass market. Access to the AWS will encourage manufacturers, product designers and programmers to connect more everyday items and produce more IoT related products.

Investors would be pleased to know it that the new initiative is profitable too – without being unaffordable for the mass market. The service charges a mere $5-$8 per million messages sent, enough to make the initiative financially viable, but still incredibly cheap. In order to widen their new IoT further, Amazon have offered starter kits to encourage and educate sceptics or technologically knowledgeable consumers to dabble in their initiative.

Since Amazon already sells everyday household items on an immense scale, it can be safe to postulate that they would have a natural advantage over the other tech companies in the IoT market. Accompanied with efforts like Amazon Machine Learning, which makes devices faster, smarter and extra secure, Amazon could potentially emerge from the “Innovative Trigger” phase as the market leader in the next exciting phase of technological growth.

Analyses Opinion

All the big research firms categorically believe Amazon’s phenomenal past twelve months is not just a short-term burst, and, with a mean price target of $720.11, consider Amazon to have strong upside potential in the long-run too.

* (Strong Buy) 1.0 – 5.0 (Sell)

(Yahoo! Finance)

The consensus amongst analyses is in line with the fundamental analysis and is definitively bullish, perhaps for the aforementioned theses or maybe because of their own considerations.

Conclusion

Amazon, like most retailers, always do well over the Christmas period and investors can therefore be confident that AMZN stock will not have too much downside potential in the short-run. Successive positive long-term signals churned out by I Know First’s algorithmic forecast for Amazon stock, leads me to believe that, despite currently seeing record highs, Amazon stock is able to maintain these highs and even stretch them in the long-term too. With inroads into creating their own clothing line and taking significant steps to dominate the impending Internet of Things market, Amazon’s long-term potential has very little limits.