AMZN Stock Prediction: Amazon’s Stock Can Still Go Up – It’s Now Challenging The iPad In China

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

AMZN Stock Prediction

  • Amazon and Baidu is launching an $80 Fire 7 Android tablet in China.AMZN
  • Cheap FireOS tablets are gateways for Amazon to improve its position against JD.com and Alibaba in China.
  • Amazon’s stock price has obvious upside potential if it makes inroads in China’s e-commerce industry.
  • Amazon doesn’t need any partnership with Apple. On the contrary, Apple should challenge Apple’s hardware products.

Apple’s (AAPL) future iPad sales in China is threatened by another company. Aside from Xiaomi’s sub-$200 Mi Pad 2, Amazon’s (AMZN) Fire 7 Android tablet is now going to challenge the iPad in China. Amazon has partnered up with Baidu (BIDU) to sell the Fire 7 for 499 Yuan ($80) in the Middle Kingdom.

This is not just about hardware or tablet competition. The launch of a sub-$80 tablet will no doubt help Amazon improve its online store’s competitiveness against JD.com and Alibaba (BABA). The budget-friendly price tag of the Fire 7 could help Amazon improve its mediocre e-commerce business in China.

China is the world’s biggest market for online trade of goods. However, Amazon only has 1.5% share in China’s online retail industry. This American firm has fumbled the ball and allowed Alibaba and JD.com to corner almost all of China’s $672 billion/year e-commerce trade.

I therefore have high hopes that Amazon could leverage Baidu’s popularity to sell millions of units of the Fire 7 tablet. Through this way, Amazon gets new potential customers for Amazon China. The $80 Chinese version of the Fire 7 is the same $49.99 Fire 7 tablet being sold in North America.

They are both good quality tablets that are portals to Amazon’s online marketplace. The Fire 7 tablet will likely inspire many Chinese customers to ignore the iPad Mini 4/iPad Air 2. And once these China residents own this Amazon tablet, they become potential customers of Amazon China.

Challenging Apple Is Good Business For Amazon

A little over a year ago, another Seeking Alpha Contributor said Amazon’s (AMZN) biggest mistake was not to beg for a partnership with Apple (AAPL). I strongly disagree with that contributor’s assumption. I firmly believe that Amazon’s future is actually better if it continues to compete, not partner, up with Apple.

The problem with entrusting iPads and iPhones to become the partner devices to drive Amazon sales is obvious. Apple is unlikely to just sit and let Amazon have a free ticket over online purchases made through its iOS ecosystem. There will be fees or revenue sharing deals to be discussed.

I just don’t think Mr. Jeff Bezos will be a submissive negotiator against the equally-headstrong Mr. Tim Cook. In fact, Apple’s ambition to expand outside of its iPhone-dependent business model is slowly leading it to compete directly with Amazon’s music/video streaming business. A hardware partnership between Amazon and Apple is an imprudent idea because Bezos now see Apple as a rival. So much so that Bezos banned the Apple TV product from Amazon’s online marketplace.

The no-holds-barred confrontational approach (not the weakling partnership buddy-buddy idea) is one reason why I love Bezos. Amazon is a league-leading company that never needed any partners to protect or grow its business. It also receives consistent strong backing from investors. So much so that AMZN has grossly outperformed AAPL’s stock this year.

AMZN Stock Prediction

(Source: Google Finance)

It would have been a stupid mistake for Amazon to seek partnership with Apple considering that company is going after the current and future customers of Amazon Music and Instant Video. I would rather prefer that Amazon challenges all of Apple’s products including the with the Mac and MacBook.

Amazon has obvious economic benefits if it can sell millions of cheap tablets and computers to people that reject the high-margin pricing facade of Apple-branded products. I repeat, Amazon should aggressively compete with the hardware business of Apple. In this way, Tim Cook will get discouraged from encroaching on Amazon’s other businesses like music/video streaming.

Amazon’s apps/games-friendly Fire TV stick definitely inspired Apple to also enable apps support in the new Apple TV 4. Innovation is Amazon’s pioneer forte too. I expect Amazon to come up with more trendsetting products like the Kindle Echo.

Conclusion

AMZN already posted an impressive 118% YTD performance but I’m still giving it a Buy rating. It is a cash flow heavy firm that could easily compete with Apple or any other mega-cap tech giant. Amazon can afford to underprice any product of its rivals. Furthermore, Amazon only sells hardware at near-zero margins because these products are mere gateways to increase its captured customers for its online marketplace.

Releasing a cheap tablet in China is one way that Amazon could grow its mobile shopping customers in that country. Once Amazon improves its 1.5% online retail business market share in China, I expect investors to push AMZN’s price higher next year or in 2017.

On a long-term scenario, I strongly believe that Amazon still has substantial growth prospects. There’s still so much more online and traditional commerce transactions that are being done outside Amazon’s platforms. Aside from China, let us not forget that Amazon still doesn’t have online marketplaces in many emerging markets like the Philippines.

I Know First made a prediction on Amazon From 7th of November 2014 for a one year period with a 215.76 bullish signal and 0.4 predictability. The Asset rose by 122.28% in the Year period. On December 2nd I Know First reviewed Amazon’s performance and development.

My long-term bullish outlook for AMZN complements I Know First’s near-term algorithmic forecasts for Amazon. The 3-day, 7-day, and 14-day algorithmic predictions are all positive or favorable for AMZN.

AMZN Stock Prediction

The holiday shopping season will again boost Amazon’s revenue this December. Every time Amazon delivers a record-breaking sales in its quarterly report, its stock always shoots up in price. I expect AMZN to breach $700 by Q1 or Q2 2016.