by Jonathan Berr | December 13, 2013 2:24 pm
Amazon (AMZN) Chief Executive Jeff Bezos can best be described as a “throw it against the wall and see what sticks” sort of guy. And so far, that strategy has paid off quite well for Bezos … and for AMZN stock holders.
Take the Amazon Kindle, for example. The e-reader was introduced in 2007 and became an immediate hit, selling out and in some cases remaining out-of-stock for months. On top of that, the Amazon Kindle has changed the way the world reads — much the same way that AMZN in general has changed the way a lot of it shops.
But don’t think Amazon is satisfied. Instead, AMZN and Bezos are always thinking ahead … and thinking big. Heck, Bezos doesn’t concern himself with small details such as profits. Instead, he is perfectly content burning through Amazon’s revenues if it means investing in what could be next game-changing idea.
And AMZN stock holders seem perfectly content with that approach, too. So far in 2013, shares of Amazon stock have soared over 54%.
With another hot year almost in the books, let’s take a look back at what Amazon plans stole headlines in 2013 … and kept investors excited about the prospects for AMZN stock:
Actual launch date: Sometime in 2014
AMZN stock investors just got news yesterday of another innovation from their company. This one is called Amazon Pantry, and it could help the e-commerce giant capture a greater share of consumer spending on packaged goods … an $850 billion category dominated by the likes of Costco (COST) and Walmart’s (WMT) Sam’s Clubs.
Amazon Pantry will supposedly be offered to the company’s Amazon Prime customers, who pay a fee of $75 per year for unlimited two-day shipping. Amazon Pantry will launch sometime next year with 2,000 grocery products such as pet food, cleaning supplies and cereal.
The economics of Amazon Pantry are a bit fuzzy — and thus so is its potential impact on AMZN stock — but here are the basics: In theory, shoppers will choose their merchandise to go in a box with a pre-set weight limit. As long as it does not exceed that limit, AMZN will ship the box of goods for a “small fee” … although it’s not specified what that might be.
It’s pretty hard to imagine a customer not reaching these restrictions when they are buying heavy but commonplace grocery items such as pet food, soda and cleaning supplies. Plus, these boxes might be too heavy for consumers to lift from their doorsteps.
It will be interesting to see how Amazon will tackle that problem — and if Amazon Pantry actually helps AMZN stock keep climbing in 2014.
Actual launch date: Already launched in select areas
Before Amazon Pantry, Amazon Fresh was the service making headlines and capturing the imagination of AMZN stock fans. Residents of Los Angeles, Seattle and now San Francisco can already get more than 500,000 items delivered to their doorstep including bakery goods, meat and fish … along with take-out meals from local restaurants.
Plus, the same-day grocery delivery service is expected to roll out to even more cities in coming months. AMZN stock investors seem to like the idea. As InvestorPlace Editor Jeff Reeves wrote:
“Given Amazon’s pedigree in the low-margin sales game and given that fresh food is a $50 billion business, it may only take the will and the logistics for AMZN to be a huge player in this marketplace.”
The one big question mark is clear, though: Just how much is Amazon Fresh going to cost?
As Bloomberg News noted recently, AMZN has been on a $13.9 billion “warehouse building spree.” Plus, delivering groceries is a labor-intensive and (another) low-margin business, while Amazon also faces a slew of competitors.
Actual launch date: 2017 or 2018
Of course, arguably the biggest news out of AMZN this year was one that feels more sci-fi than reality. Jeff Bezos recently went on 60 Minutes, where he laid out a vision of Amazon packages being delivered by armadas of drones.
While the news had everyone talking, there are several problems with this plan. First, drones have an unfortunate tendency to crash into stuff and explode. And though Bezos said that such a service would be ready in four or five years, it doesn’t seem likely that the Federal Aviation Administration will even have its drone regulations finished by then.
Then, like everything about Amazon, there is the issue of cost. Sure, AMZN stock investors seem fine with Bezos & Co. blowing all its sales on the next big thing for now. But how long will it last? I’m no expert, but nothing about drones sounds cheap. Besides, I would think that Amazon will have difficulties in pricing competitively against FedEx (FDX) and UPS (UPS).
Amazon drones may have captured everyone’s imagination, but I wouldn’t call them a reason to buy AMZN stock.
Actual launch date: Q2 of 2014 (rumored)
It should come as no surprise that Amazon is also itching to get in the smartphone game, and attempt to compete with big shots like Apple (AAPL), Google (GOOG) and Samsung (SSNLF). Yes, there is apparently an Amazon smartphone in the works. And not just any old gadget, but a 3D phone.
According to AppleInsider, the Amazon smartphone has “3D gesture input and eye tracking input” … which certainly sounds impressive.
But the Amazon smartphone is just another question mark for followers of AMZN stock. That’s because the smartphone market as a whole is undergoing a sea of change, with the days of subsidized gadgets — like the high-end Apple iPhone or Samsung Galaxy S4 — possibly nearing an end. AT&T (T) CEO Randall Stephenson, for example, recently pointed out that it makes little since for telecom providers to continue to subsidize smartphone sales since the market is saturated.
If the end of subsidized phones does indeed come to pass, it could have huge implications for Apple, Samsung and other incumbent players. And it would likely mean introducing a new Amazon smartphone will be even tougher.
Source URL: http://investorplace.com/2013/12/amzn-stock-amazon-pantry/
Short URL: http://invstplc.com/1aLQGbM
Copyright ©2015 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.