Amazon.com, Inc. (AMZN) stock was the second-best performer in the S&P 500 in 2015, more than doubling in value in a single year. For a company that was already worth upwards of $100 billion, that’s a hard thing to do.
However, 2016 hasn’t been quite as kind to Amazon shareholders — shares of the e-commerce giant are off 14% year-to-date. That’s OK. Longtime AMZN stock owners know that Wall Street has a tough time deciding how to properly value the company.
In the years ahead, the calculations shouldn’t be quite as complicated. That’s because if one of its recent moves is any indication of how it will continue to act in the future — and I believe it is — Amazon shares will have no choice but to skyrocket.
No, this recent move doesn’t have anything to do with Amazon’s high-margin cloud computing behemoth, Amazon Web Services. And it’s not a new shopping holiday, AI-infused tech gadget, or streaming video service.
It’s a water filter.
AMZN: A Glass Half-Full
Amazon has teamed with the good folks at Brita to offer a seemingly harmless, bland new product: a water pitcher with a filter in it. But what’s special about this particular water pitcher — and what has vast implications for the future of retail — is that it’s hooked up to Wi-Fi.
It’s not connected to Wi-Fi not so you can surf the web on the thing, but so that when your filter has almost reached its capacity and done all the quality filtering its little heart can handle, the pitcher orders a new filter for you. This is done through the Amazon Dash Replenishment Service — which “enables connected devices to order physical goods from Amazon when supplies are running low.”
This is an absolutely brilliant idea. Ideas like this are behind AMZN stock’s incredible long-term track record. The company thinks outside the box.
The water pitcher, of course, is just the tip of the iceberg. The bigger picture here is that AMZN could change the way we shop for household items, and eliminate the need to go to the store for them entirely.
It’s part of the emerging world of the Internet of Things, in which everyday products and appliances will be connected to the Internet, enabling them to become “smarter” and far more useful. AMZN is smart to get a head start here, and its DRS program also features a number of other products, including:
- A printer that automatically re-orders toner when you’re running low
- Hand sanitizer pods that re-order soap when you’re running low
- Washers and dryers that re-order supplies at appropriate times
- Dog food bowls that do the same thing
Sure, right now the additional revenue this program brings in won’t make or break Amazon or AMZN stock … but looking at the big picture, this is a game-changer. The initiative poses the realest long-term threat yet to dismantling brick-and-mortar retail as we know it — because it actively keeps people away from physical stores. You don’t even have to think about these goods — they’ll just come to you when you need them.
Expect this to become a bigger focus area in the years to come — and when it does, expect Amazon stock to respond accordingly.
As of this writing, John Divine was long AMZN stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
