Amazon.com (AMZN) continues to take measures throughout the technology industry to improve its services and product offerings. At a stock price near $222 per share, Amazon stock is right in the midst of its 52-week range. There is obvious potential for growth in stock price, as Amazon has seen a much higher price in the last year. That being said, Amazon stock is quite volatile; it has also seen prices as low as $166 per share. Amazon has high growth potential, and based on its expansion in media and product offerings, I expect its stock price to rise in the future.
Amazon is continuing to expand its brand name, with reports that the company will increase its presence in Europe. The Amazon App Store will be launching in Europe later this summer, beginning with potential developer applications for the European app store being accepted within the next couple of weeks. Amazon's app store is similar to Apple's (AAPL) App Store, and Google's (GOOG) Google Play store. Users can purchase applications through the app store and download them to any of their Android devices, whether smartphone or tablet. While it is unknown exactly what applications will be sold through the app store, one can be sure Amazon will do extensive research to tailor the app store to European preferences.
One of Amazon's highest potential products, the Kindle Fire tablet computer, has seen a drastic decline in demand in the United States, which happens to be the only market where the tablet is available for sale. The International Data Corporation released a study that showed that shipments of the Kindle Fire fell from 4.8 million units in the fourth quarter of 2011 to fewer than 750,000 units in the first quarter of 2012. There is a clear opportunity for Amazon to boost Kindle Fire sales by introducing the product for sale in Europe, and even Asia.
Furthermore, a study by ChangeWave Research showed through a survey of North American consumers, that only 8 percent of those polled were interested in buying Amazon's tablet in the next three months, compared with 22 percent last November. This clearly shows that consumers in North America have lost any infatuation they once had with the Kindle Fire, and a decline in sales will likely occur.
This is a major opportunity Amazon does not want to lose out on, as mobile computing via smartphones and tablets is becoming more and more popular. Amazon could release the Kindle Fire into Europe, just as it plans to do with its the Amazon App Store, to help boost sales. A boost in sales could lead to higher profitability, which will help increase the incentives to invest in Amazon, hopefully resulting in higher stock prices.
Another service that Amazon has been working to drastically improve is its instant video streaming service. The instant video-streaming segment of the technology sector has huge potential for growth, and its current status is a pretty wide open market. There is really only one definite company that holds a firm stake in this segment. Even that company, being Netflix (NFLX), has run into extreme issues, whether it be pricing problems or contract negotiation setbacks, resulting in an extremely volatile stock price.
Amazon's most recent addition to its video streaming is the announcement of its licensing agreement with Metro-Goldwyn-Mayer Studios that will add hundreds of television and movie titles to Amazon's Prime Instant Video library. Users will be able to watch any of these new titles, which include movies such as "The Terminator" and "Rain Man," for a flat rate membership fee. Just like Netflix, Amazon's Prime service is offered on a number of devices, including the Xbox 360 and PS3. While Netflix continues to struggle, Amazon Prime seems positioned to pounce on any further miscues, which could help it grow market share and drastically increase revenue from its instant video streaming service. As long as Amazon Prime keeps improving its service, shareholders should see stock prices increase in response.
Amazon.com, which originally launched as the world's largest online bookstore, has since exploded into online retailing of almost every product one can imagine; yet it is still continuing to improve the service that started it all. Amazon announced the acquisition of Avalon Books, a 62-year-old publishing company that owns over 3,000 titles. Amazon.com's publishing branch, Amazon Publishing, will publish all of the new titles and make prints available in libraries and bookstores. Avalon Books have not yet gone digital, but Amazon does intend to make the books available on the Kindle Fire over time. This acquisition should help in more than one way. It will definitely increase revenue that comes from the Amazon bookstore segment, and it could even indirectly increase the sales of Amazon's Kindle Fire, as the company is vastly increasing the size of its online bookstore.
All of Amazon's expansion and improved services seem to have led to huge increases in the consumer electronics market. Amazon's consumer electronics sales jumped 51.5 percent from 2010 to 2011, and I would expect another huge increase as Amazon continues to improve its services throughout 2012. Amazon's continued success in the consumer electronics department has hurt retailers like Sears Holdings (SHLD) and Target (TGT); many of which have seen decrease in sales of consumer electronics during the same period Amazon has seen an increase.
While Amazon stock prices are relatively volatile, which makes me slightly concerned from an investor standpoint, I believe Amazon should see fairly steady growth in the future. I believe the stock price will increase in response to the announcements I have discussed, which makes Amazon a short-term prospect for investors. Furthermore, I think these announcements of acquisition and improved services will actually lead to more long-term growth than short term. As revenue begins to increase, and as Amazon extends further into the global market, I think investors will see an increase in the stock price and value of the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
