Amazon Stock Forecast: Amazon (NASDAQ: AMZN) Is Soundly Beating Apple In Smart Speakers

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First.

Summary:

  • Congratulations to Amazon. It looks like Apple’s HomePod smart speaker is a flop.
  • As per the Q1 2018 report of Strategy Analytics, Apple only shipped out 600,000 units of the HomePod. This is way below expectations.
  • Amazon again topped the Q1 rankings. It shipped out 4 million Alexa-powered Echo smart speakers. This will only compel third-party developers to create more skills for Echo speakers.
  • Amazon touts 43.6% share of the 9.2 million (up from 2.4 million in Q1 2017) smart speakers shipped in Q1 2018.
  • Even if Apple produces a more affordable version of the $349 HomePod, Amazon’s long-term leadership in smart speakers will remain intact.

Amazon (AMZN) deserves to be congratulated. In spite of the millions of Apple (AAPL) loyalists, it looks like the HomePod is a commercial flop. Strategy Analytics has released its global smart speaker estimates for Q1 2018. Apple apparently shipped out only 600,000 units of the $349 HomePod.

Apple’s entry in the smart speaker industry did nothing to prevent Amazon from doubling up its quarterly shipments of Alexa-enabled Echo speakers. It is true that Amazon’s market share is now less than 50%. However, Google (GOOGL) and Apple (AAPL) are unlikely to replace Amazon’s as the king of smart speakers.

The reality is Amazon is selling $50 to $99 smart speakers with advanced self-learning and artificial intelligence features. I do not think Apple will dare match the pricing strategy of Amazon Echo speakers. Further, Alexa has already tons of third-party made skill. As of March, there are now 30,000 Alexa skills available in the United States.

The less-developed Siri voice-based artificial intelligence platform of the HomePod is unlikely to attract the same amount of interest from third-party developers. Programmers are now earning big money from creating Alexa skills for Amazon Echo owners.

The Alexa Apps Economy Is Growing And Its Boosting Echo Sales

Like how the smartphone became so big and important in our lives, Amazon is rewarding developers with real money to create a growing app ecosystem for Echo smart speakers. The more Alexa skills there are, the more people will be attracted to purchase the Amazon Echo. Amazon’s understanding of this core principle is why it will remain the runaway leader in smart speakers.

Amazon has released the beginner-friendly Alexa Blueprints. It is a platform of templates for quick and dirty coding/customization of Alexa Skills. Skills are Amazon’s terminology for custom applications for Alexa-enabled smart speakers.

The more numbers of apps available for a particular brand of smart speakers, the more it becomes attractive to potential buyers. The more Echo sales are posted, the more developers will be attracted to develop Alexa skills. The more Echo owners there are, the more chances that Amazon can make them long-term customers of its e-commerce business.

This apps-driven idea is something that Apple has not yet realized. It thinks that by marketing HomePod as an excellent-sounding music speaker will attract buyers. Unfortunately, the core selling point of smart speakers is they should be intelligence home assistants. If people want a nice living room set of  surround speakers, the HomePod won’t be on their shopping list.

Why Amazon Is Bullish On Home-centric Smart Devices

The reason why Amazon is willing to sell very affordable smart speakers is it realized that online shopping is better done via voice commands than touch operations on smartphones/tablets. There’s also the long-term advantage of putting always listening smart home speakers inside people’s houses.

The artificial intelligence platform of Amazon can gather more information on the people living in the house through the Echo speaker. Amazon is now like the FBI (Federal Bureau of Investigation) putting an eavesdropping to collect intelligence on people who could become potential long-term online shopping customers.

The difficult art of making correct product recommendations via voice/visual clues online requires Amazon to gather as much personal data/preferences on people. This edict is why Amazon also released the camera-equipped and display-equipped $230 Echo Show smart speaker.

(Source: Amazon)

Conclusion

The persistent leadership position of Amazon in the smart speaker business is one more reason to go long AMZN. Investors should really accept it – Amazon wants a surveillance camera and microphone in the garage, kitchen, living room, bedroom, and playroom of residential houses. It is Amazon’s way of total data gathering for the sake of improving its e-commerce business.

The future of smart online shopping requires Amazon to deliver correct product recommendations to people on 24/7 basis. Going forward, Amazon will be able to gather enough personal information to make people buy things that they don’t even really need. Self-learning smart shopping bots will be able to learn enough about a person’s habits and wants that making subtle shopping suggestions can become super-persuasive on the subconscious level.

The Echo brand of products is helping Amazon achieve this mission. The affordable price tags on Echo products will help attract more buyers. The more Echo owners there are, the more developers will create third-party Alexa Skills.

The apps-driven and low-pricing approach of Echo smart speakers will keep Amazon ahead of Apple and Google.

The more people there are hooked on Echo smart speakers, the more future long-term customers for Amazon’s online marketplace.

The bullish one-year algorithmic market trend forecast from I Know First fortifies my buy rating for AMZN.

TipRanks has a median 12-month price target of $1,859.97 for Amazon’s stock. It could be profitable to buy AMZN now while it still trades below $1,600.

(Source: TipRanks)

Past I Know First Forecast Success with AMZN

I Know First has made accurate predictions on AMZN in the past, such as its bullish article published on July 25, 2017. In the article, Amazon was rumored to be finally launching its services this week in Singapore and we discussed Amazon’s generous freebies and discounts for Prime subscribers that might helped it compete better against Lazada. Since the article’s release, AMZN shares have increased by 51.53% before the end of 1 year period in line with the I Know First algorithm’s forecast. See chart below.

This bullish forecast for AMZN was sent to I Know First subscribers on July 25, 2017.

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I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

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