Why You Should Be Bullish On Amazon Long-Term
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Amazon (NASDAQ: AMZN) is one of the few companies that have invested a lot of effort, money and time in new products and services. It is increasingly becoming important with each passing day, whether in infrastructure investment, in the gaming market, or in its expansion into other markets in the world. I would like to highlight the unconventional and adventurous nature of Amazon's products and services. The company has ventured into areas that no other technological company has done in the past, in such a versatile and free flowing manner. Amazon's cloud computing service, its foray into gaming, online wine cellars, and expansion into emerging markets like Brazil has helped the company to influence its fundamentals positively and boost investor confidence.
The creation of the Amazon Web Services (AWS) in 2006 appeared to offer cloud infrastructure services based on the same technology platform used in online shopping services company, which has attracted a large number of clients in the last six years. Since the launch of AWS, Amazon began offering a complete datacenter for companies wishing to save time and money, attracting new users.
The Amazon cloud system has a great focus in reduction of price of services, dropping 11 times in five years, especially in a market with little competition until recently. Besides, Amazon's investment in a flexible system that offers different possibilities for different types of audiences has helped it to become the go-to place for cloud computing. Amazon should continue to invest R&D effort in ameliorating the flexibility of its cloud system in order to attract a larger number of users who are in search of a multifunctional platform.
Now, Amazon has officially entered the gaming market. The company launched its first mobile game developed by Studio Amazon. The game is called "Air Patriots" and is now available for iOS, Android, Kindle Fire, and Kindle Fire HD. The game control is achieved by finger movement on the screen. Players command a squad of military aircraft and develop paths that aircraft must traverse through to defeat the enemy. Users of Kindle Fire and Kindle Fire HD will also be supported by Amazon GameCircle for management of levels and high scores. Besides the possibility of using Whispersync to save games, Air Patriots has 28 levels and 7 different maps. Its free version has only 3 maps.
Another novel service by Amazon is the launch of a new cellar service in the United States. According to the company, the novel cellar will function as a virtual wine shop with over a thousand varieties of beverages in the United States alone. Customers can buy wines on the site, filtering their search by origin, harvest, price or flavor notes. Besides American wines, the company will offer international labels through external sites to its page.
As Amazon's ambitions are not limited to the U.S. market, it is getting closer to arriving in Brazil. According to sources, the company is hiring 14 professionals, a move that reinforces their arrival to the country soon. The contracts are for engineers who will work as data center managers to look after land acquisition for Amazon's distribution warehouses. There is also an opportunity for a senior analyst with a strong understanding of the Brazilian tax system and government processes and a product manager to take care of the Kindle digital reader.
Speaking of Brazil, Amazon may be in the process of negotiations to acquire Saraiva, a popular bookstore chain and e-commerce store in Brazil. The information was published on the website of Bloomberg, which cites the source as a "person with knowledge of the matter" who declined to be identified. It was not revealed at what price the company will be bought.
For quite some time, experts have stated that Amazon considers Brazil to be a very promising market. According to consulting firm E-Bit, online shopping market in the country has increased by 20% over last year, reaching $22.5 billion. Another objective of Amazon is to launch Kindle digital book reader in the Brazilian market, which also will encourage its eBook business in the country.
Meanwhile Apple (NASDAQ: AAPL) never had the intention of launching a tablet with a lower price, but it just did, with the launch of the iPad mini. IHS Company, which researched the device, concluded that the company spends about $188 to manufacture the device. Thus, the company can sell its tablet for a much lower price, but has opted to sell it for $349, earning 85% profit on each unit. The market positioning of the iPad Mini is quite different from Amazon's Kindle Fire.
Meanwhile, Microsoft (NASDAQ: MSFT) may be preparing to announce a tablet dedicated to gamers. According to information released by the U.S. website The Verge, the device may be called Xbox Surface. According to sources consulted by the site, the tablet will have a 7 inch screen and it will support conventional tasks like messaging, but its main focus will be on games.
Google (NASDAQ: GOOG) has achieved much success with the Nexus 7, which is the only tablet that can actually compete with Apple. David Change (CFO Asus) spoke to the Wall Street Journal and said that in just a month nearly 1 million devices were sold worldwide. He also revealed that in the beginning 500,000 Nexus 7 devices were sold and later last month the tablet's sales peaked to nearly 1 million devices. The information clearly shows that many consumers are willing to spend their money on other devices, and not just on Apple's devices like in the past.
Samsung's (SSNLF) numbers are pretty optimistic too, and I have a feeling the company will soon overtake all its competitors with regard to tablets and cellphones. According to IDC, Apple sold 14 million handsets in the third quarter while Samsung sold another 5.1 million. The Korean manufacturer has seen the number of handsets sold grow by 325% compared with the same period last year. Undoubtedly, a remarkable growth.
Amazon has a market cap of $102.51 billion and revenue of $57.26 billion, which suggest that the company is a formidable one that can't be easily ignored. With an enterprise value of $97.26 billion and a profit margin of 0.07%, Amazon puts most of its competitors to shame. With a price to book ratio of 13.64 and a price to sales ratio of 1.8, we can easily assume that Amazon is doing much better than its competitors at the moment. Also, Amazon's current portfolio has improved when we compare its numbers to its past. This is mostly because of novel services and products that Amazon has continued to offer, and the adventurous stance it has always adopted. I have total certainty that the company promises to be one of the best investment choices you can make today due to its portfolio of investments. I believe Amazon will trade slightly higher in the coming weeks and quarters, but investors should hold this stock for the long-term to maximize gains.
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