Amazon Stock Price Prediction: Amazon Has A Great Future In Subscription Video On Demand

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


Amazon Stock Price Prediction

  • Amazon now offers a standalone $8.99 Prime Instant Video subscription service.
  • Prime Instant Video was formerly available only as a bundle within the $99/year Amazon Prime free shipping program.
  • Netflix’s growth in the U.S. will definitely feel the pain from Amazon’s aggressive move.
  • The Video-on-Demand industry benefits from cheaper broadband fees and more affordable LTE phones.
  • Americans are binge-watching more on their smartphones, computers, and tablets.
  • The I Know First Algorithm is currently bullish on AMZN stock

Not all people who binge-watch video-on-demand are habitual online shoppers. I, therefore, approve of Amazon’s (AMZN) move to offer a standalone $8.99/month Prime Instant Video service. This new offer is initially available for U.S. customers only. Prime Instant Video was previously exclusive to $99/year Amazon Prime subscribers.

By making it a separate service, Prime Instant Video could steal customers away from Netflix and Hulu. The month-to-month subscription model is also similar to Netflix’s cancel-anytime monthly payment scheme. The newly-independent Prime Video service is precisely aimed at Netflix (NFLX).

Amazon is ruthless every time it decides to go big time on a product/service category. Like Netflix, Amazon is a champion of the thin-margins-to-recruit-customers strategy. The $8.99 Prime Video monthly service is already $1 cheaper than Netflix’s.

There is a strong probability that Amazon might even reduce the monthly fee to $7.99/$6.99 just to steal customers away from Netflix and Hulu.

All-Aboard The Money Train of Video-On-Demand

Prime Video is now a priority expansion product for Amazon. There’s big money to be made on servicing the growing binge-watching compulsion of people.

Amazon Stock Price Prediction

Amazon Fire Tv Stick

The global Video-on-Demand ((VOD)) industry is projected to grow to a $61.4 billion market by 2019. Getting just 10 million American subscribers to the new Prime Video service can contribute an additional $89.9 million to Amazon’s monthly revenue.

This monthly rate could grow 3x higher once Amazon offers the standalone Prime Instant Video service in other countries. The global opportunity of VOD means Amazon will also eventually have to challenge Netflix outside of America. Thirty-five percent of TV/Video viewing time of people around the world is done through on-demand/streaming video services.

This 35% estimate is better understood when we take into account that the Ericsson (ERIC) ConsumerLab TV & Media Report 2015 represented the habits of 680 million people. Netflix only has 70.1 million subscribers. There’s a lot more room for growth in the VDO business.

Growing Prime Video’s Library

Amazon obviously has a much smaller library of licensed movies/TV shows compared to Netflix. However, I expect Amazon to do more original shows to help attract loyal subscribers. The commercial success of Netflix proved that original shows are effective selling points to retain subscriber loyalty.

Exclusive content is a key factor that will differentiate Prime Instant Video. Amazon has  to offer something new and unique to capture a bigger audience. Since the Prime Instant Video is a priority product, Amazon will likely spend more than $1.3 billion budget on original programming.

Amazon won five Emmy awards last year.  Netflix only got four Emmys in spite of it having 3x more nominations than Amazon. This goes to show that Netflix doesn’t have a monopoly on great original TV shows.

Amazon is also innovating to improve its streaming video platform. It was Amazon, not Netflix, who pioneered streaming HDR (High-Definition Range) videos last year. After 4K and Ultra-HD, HDR is the next evolution toward better video resolutions.

Prime Instant Video Can Also Help Sell More Hardware

Amazon has a thriving hardware business. Sales of the Fire TV box/dongle and Fire Android tablets could get a boost from a standalone Prime Instant Video. Amazon’s software is optimized to work best on its brand of tablets and smart TV products.

As illustrated by the chart below, Ericsson’s survey found out that the tablet is popular for video consumption among younger people. Fifty-five percent of teenagers in the U.S. view videos on mobile devices.

Amazon Stock Price Prediction

(Source: Ericsson ConsumerLab)

All firms involved in subscription-based Video-On-Demand will have to optimize their content/software to cater to smartphone/tablet users. Mobile is the future of media consumption.


Investors who like the growth potential of Video-On-Demand should add AMZN to their portfolios. Amazon can undercut the monthly subscription fees of Netflix and Hulu. Amazon could also outbid Netflix when it comes to licensing new content.

My buy rating for AMZN is also supported by the positive algorithmic signal from I Know First. Amazon’s stock is trending favorably to deliver positive returns after 1 month, 3 months, and one year. I expect this  stock to hit $300 before 2016 ends.

Amazon Stock Price Prediction

The I Know First Predictive Algorithm previously predicted the bullish stock movement for AMZN with a signal of 105.74 and predictability of -0.06 reaching a magnificent return of 102.04% in 1 year. The average long position had a 37.69% return and the short position had a 19.70%.

Amazon Stock Price Prediction