Why Amazon Could Hit $10,000
You might think Amazon shares are expensive now, but just you wait.
Read on below to see why Amazon’s stock could head much higher.
Why Amazon May Be Headed to $10,000 a Share
“Alexa, what time is it?”
Alexa is the name of Amazon’s voice-based smart home assistant.
You can ask her to play music, give the local weather forecast, read you the news, shop for products on Amazon and control other smart devices in your home such as lights and TV. You can even order a pizza from Domino’s.
There’s no activation button to press. Simply say the trigger word — “Alexa” — followed by what you want to happen and voila! Your wish is her command.
I don’t own one, and I find the device to be somewhat irritating at times. (I feel the same way about Apple's Siri.) But millions of Americans disagree with me.
Alexa is the name associated with the voice, but the device is the Amazon Echo.
Amazon is dominating the voice-activated home assistant category, with a 70% market share, according to Consumer Intelligence Research Partners.
An amazing 23% of U.S. households with a broadband connection use an Echo.
Amazon doesn't disclose Echo, but CEO Jeff Bezos said, "Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don't see positive surprises of this magnitude very often; expect us to double down.”
Echo was initially used for things like playing music and answering questions but is morphing into a helpful appliance that is going to generate mountains of cash for Amazon.
First off, Echo users do a lot of shopping at Amazon. According to Consumer Intelligence Research Partners, the average Echo-using household spends $1,700 a year at Amazon compared with $1,300 for the average subscriber to Amazon Prime.
That means Amazon customers who are dedicated users of Echo spend 30% more online with Amazon, delivering a nice boost to the company's bottom line.
All totaled, there are 45,000 different uses for Echo. For example, Alexa is linked to Whole Foods Market for easy home delivery of groceries.
But the biggest explosion is going to come from the internet of things, or IoT, which will link just about every electronic device that you own to the internet.
Echo will be the link to internet-enabled devices in your home, such as internet-connected ovens, dishwashers, heating systems, TVs, door locks and more.
“Alexa, preheat the oven to 350 degrees.”
“Alexa, start the dishwasher after I go to sleep.”
“Alexa, turn the thermostat down by two degrees.”
“Alexa, record Game of Thrones.”
“Alexa, lock all the doors.”
“Alexa, wake me up at 7:00 a.m.”
That day isn’t far away.
Amazon’s Echo will become the center of your internet universe and allow Amazon to siphon off a small slice of many of your consumer spending dollars. Imagine the following:
Alexa: “You are overdue for an oil change. Would you like me to schedule an appointment at Jiffy Lube for you?"
You: “Alexa, schedule an oil change for me this weekend.”
And Jiffy Lube (just an example) will pay Amazon a small commission on the money you spend there.
Alexa: “It's 7:00 p.m. and you haven’t turned on the stove or oven. Should I order your favorite pizza and have it delivered?”
You: “Alexa, order pizza from Domino's for delivery.”
And Domino's (just an example) will pay Amazon a small commission on your pizza order.
Alexa: “Amazon is on your ‘watch list’ and is down 10% from its 52-week high. Would you like to buy 50 shares in your Fidelity account?”
You: “Alexa, buy 50 shares of Amazon in my Fidelity account.”
And Fidelity (just an example) will pay Amazon a small commission on your stock trade.
Amazon looks expensive at over $1,800 a share and at 75 times earnings, but I think the investment world is grossly underestimating the grand slam that Echo is going to become. I expect Amazon to go much, much higher.
That doesn’t mean you should rush out to buy Amazon stock today. But if you think it's overpriced, take another good look at Amazon the next time its stock takes a tumble.
Here's to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch
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