Amazon.com, Inc: Sales Hit Record High, But The Stock Is Facing Resistance

Amazon.com, Inc (NASDAQ:AMZN) is making a strong push to find a place inside your home.

Amazon.com, Inc Sales Hit Record High, But The Stock Is Facing Resistance
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It has been a busy week for Seattle based eCommerce giant Amazon.com Inc (NASDAQ:AMZN). The company's flagship member exclusive event, Prime Day, was a smash hit. Sales jumped 60% from last year, even leaving behind Black Friday and Cyber Monday sales. And it was not just the overall sales numbers that were impressive. The company announced that a record number of customers have signed up for Amazon Prime, the company's subscription service and also that 50% more subscribers shopped during this Prime Day sale.

Amazon.com Inc is making a strong push to get inside your home.

Among the biggest hits of the annual event were Amazon's Echo speakers and other Alexa devices. For a while now, Amazon.com Inc has been making strong efforts to get its Echo speakers inside your home, by making it both smarter and cheaper. Amazon has been adding several skills to Alexa to make it more enticing and more useful. Alexa's skills have more than doubled this year, from 7000 in January 2017 to 15000 at the end of June 2017 and have grown exponentially from the 135 skills Alexa possessed in January 2016. More Skills across a wider variety of tasks makes a system like Alexa more appealing than rival voice assistants. The addition of skills is showing results. Alexa's monthly active users have jumped 325% in the last one year, albeit on a small base. Its user engagement also increased from 10 percent to 22 percent during the same time frame.

Amazon Alexa skills

Add to that, the company is heavily promoting Echo speakers and other Alexa devices. "Voice shoppers", i.e the users who shopped on Amazon.com through Alexa enabled devices like Echo, got early access and exclusive Prime Day deals. Users who were voice shopping for the first time got $10 bonus promo codes. Amazon also made it easier for Alexa users to sign up for prime subscriptions and also provided them with $20 dollar discounts on annual membership fees. The most sold devices on Amazon during the recent sale were its Echo line of smart speakers. Unit sales of Echo Dot speakers jumped seven-fold from last year while traditional Echo speaker broke all the previous sales records. A major reason behind this sales jump is the heavy discounting. Echo Dot was selling at $34.99, 30% cheaper than usual while traditional Echo speakers were selling at a 50% discount.

So why is Amazon promoting Alexa devices so heavily? By pushing Echo devices aggressively, the company is trying to increase its installed base and take an unassailable lead over its rivals. As the installed base increases, more developers are likely to create skills/apps for the Alexa ecosystem which will entice even more users to buy the product and the cycle goes on. Apart from speakers, Alexa has also been integrated into phones and cars. By expanding the number and type of Alexa based devices, the company is trying to become the gateway to the internet and also make shopping on Amazon.com more convenient for its customers. Whether you are sitting at home or driving your car, you just need to ask and products will be delivered at your doorstep. And considering that Echo devices will be sitting full time in your room, Amazon can gather more data to personalize the products for you. According to RBC capital, Alexa based devices could contribute up to $10 billion to Amazon's top line in next few years.

Amazon.com Inc stock is back above $1000 mark.

Amazon stock had rallied more than 5% going into the Prime Day sales and is trading once again above the psychologically important $1000 mark. However, the stock is currently facing resistance. The stock has been trading in a range-bound fashion since June beginning. Amazon stock has not been able to hold above the $1000 mark for long in its previous two attempts and continues to face resistance around $1012 level. There is also talk of anti-trust action against Amazon. According to Doug Kass, a fund manager at Seabreeze Partners, Amazon's disruptive growth could force the government to impose restrictions on it, slowing down its growth. Mr. Kass said that he has learned about early discussions and due diligence being considered, which if true will not be good for the company and the stock. But currently, there is not much evidence of any anti-trust investigations. Amazon stock remains a good long term buy. Of the 46 analysts tracking the stock, 40 have a "buy" or 'strong buy' rating.

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Kumar Abhishek Kumar Abhishek   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

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Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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