Amazon is one company that we’ve had a major change of mind about in the recent years and as negative as I was about the company, I did turn more positive in recent months and even went long Amazon recently. There are many things to like about the leading ecommerce company but its Kindle strategy seems to be working to the extent that Amazon remains a very relevant player in the tablet/ebook reader space and that is unlikely to change in the near future.
What has not changed is Amazon’s lead in ecommerce and recent acquisitions and a customer service unlike any others have clearly helped the company gain even more ground on leaders such as Ebay and Barnes & Nobles. It has also launched efforts to offer virtual goods and started offering products such as streaming videos thus entering Netflix’s (NFLX) space.
It is about the cloud
What I had not anticipated last year though was how well Amazon would perform in “cloud computing” and that seems to only be getting better. There are many different ways that Amazon is playing it but here are a few and you should know that in all of these, Amazon seems to have taken a leader role which certainly looks promising for the future.
–AWS: Amazon’s “digital” warehouse is quickly becoming a source of growth as the company lends virtual space to companies around the world either for storage, processing or other purposes. Many other companies compete but Amazon is growing more quickly thanks to better pricing, a better service and what has been a very reliable service so far.
–Android App Store: While we spend a lot of time discussing Apple (AAPL), the truth is that the mobile operating system that has more momentum than any other is Google’s (GOOG) Android and in that space Amazon has been a true leader not only in publishing apps but also in opening what seems to be the best overall App store which is sure to help future growth
–Retail “cloud computing”: Some companies such as Google have made a few efforts but overall most cloud players have only gone after businesses. It’s a big mistake in my opinion. Everyone is going digital and documents, photos, music and others need to be stored in the “clouds”. Why? Because it is convenient to have access from anywhere but even more important is having a reliable backup system. Having an external hard drive will serve no purpose if you are a victim of a fire, or any other physical event. I think the future for individuals is cloud computing and the recent launch of “Amazon Cloud Drive” is a promising product.
What the cloud means for Amazon
Personally, I think that right now the key for Amazon is not related to revenues or profits but rather becoming the leader in the clouds and fending off both Google (GOOG) and Microsoft (MSFT) as much as possible. But I have no doubt that these activities will become major sources of profits in the next 5-10 years and am more bullish about Amazon’s stock than I have been in a long time.
Disclaimer: We are long Amazon