Amazon's Super Bowl Advertisement Buy
Making a move to broaden exposure for its Echo speaker and hardware device, Amazon (NASDAQ: AMZN) purchased a 30-second spot for $5 million that aired during the Super Bowl game last Sunday night. The ad, which featured Dan Marino and Alec Baldwin interacting with Alexa, the Echo device's virtual assistant, was Amazon's pitch to increase product knowledge for its Echo to the millions of viewers watching the Super Bowl. Amazon already enjoyed increased sales of Echo devices over the holidays, but many people were still unaware of the product. By advertising during the Super Bowl, Amazon reached out to millions of potential new customers, making them aware of Echo's existence and what it does. It is unclear whether the sales of the device have increased since the Super Bowl, as Amazon does not release sales figures for its individual products.
Amazon Web Services as a Potential Long-Range Profits Driver
While Amazon is well-known for as an e-commerce juggernaut, the company's Amazon Web Services is now dominating the field of the provision of scalable cloud computing. CEO Jeff Bezos and the management of Amazon believe that AWS could eventually equal the size of its e-retail business. During the fourth quarter, the company's revenue from AWS rose by 69 percent to $2.4 billion with an increase of AWS's operating income surging to $687 million, a 186 percent increase. Analysts believe that Amazon has the potential for its AWS to be a major profit and revenue driver for many years.
Amazon Works to Broaden Its Own Delivery Services; Loosen Ties With UPS
Amazon is also seeking to broaden its own package delivery services and loosen the ties the company has with UPS. This move comes as Amazon reported shipping cost expenses of 11.7 percent in the fourth quarter, an increase from its previous cost of 10.4 percent of revenue. This could help the company lower its shipping costs and free up additional revenue.
Recent Results and Competitor Comparison
Amazon's total year-to-date returns have fallen by -25.71 percent, reflecting its uneven performance. However, over the last one year, the company's total return percentage has increased by 34.3 percent. Competitor Alibaba (NYSE:BABA) has experienced a year-to-date drop of its total returns by -22.92 percent and a one-year drop of -28 percent.
Recommendations: Time to Buy
Amazon's exposure via its Super Bowl ad brought product awareness for Echo to potentially millions of new customers. This should translate into increased sales for the Echo. The company's AWS is quickly growing and has the potential to drive long-range profit and revenue growth.
If Amazon continues its drive to lower its shipping costs by expanding its own ability to deliver packages globally, it has the potential to increase its available revenue and cut its cost margin. Amazon appears poised to increase profits, and we strongly suggest that investors consider buying shares.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.