Amazon.com: A Buy on the Sell-Off

Amazon's  (NASDAQ: AMZN  )  expansion into newer business lines and markets represents massive growth potential for the company. Amazon's sustained momentum in signing up Prime users and the launch of Fire TV will lead to robust media and content sales. The company's high margin third-party business will also aid in driving more upside in the company's revenues and earnings. 

Prime is slated for growth
Amazon Prime now has more than 20 million customers, and its recent price hike will lead to incremental revenues of more than $400 million annually. The company's CEO, Jeff Bezos, stated in his annual letter to shareholders that on a per customer basis, Prime subscribers are ordering more items from categories than ever before. 

And Amazon has hiked the selection of Prime eligible goods to more than 20 million items, which alone justifies the price increase to $99/year from $79. The company's Prime Instant Video offering has seen substantial progress in new members, usage metrics and cumulative number of streams. 

In addition, Amazon has increased its investments in Prime Video by developing more original content for its subscribers. Some of Amazon's pilot shows have received good reviews, and are now in their development stage, and should aid in keep Prime churn rate to a minimal amount. Amazon has also rolled out Prime Video recently in two major European markets, including the U.K. and Germany, and should see robust sign-ups going forward. 

Fire TV has huge potential
The company's recently unveiled Fire TV player is Amazon's foray right into the living room of its consumers and goes directly head-to-head with Google, Apple  (NASDAQ: AAPL  ) , and Roku. The Fire TV is a great way for Amazon to promote Prime, but also comes with competitor offerings including Netflix and Hulu.

In addition to being a video-streaming player like Roku, Fire TV will provide consumers to access Amazon's large collection of movies and TV shows a la carte from its gigantic ecosystem. Apple has been generating robust revenue growth from digital content sales, and this competitive offering from Amazon might hurt a la carte sales on iTunes. In the last quarter, Apple's revenue growth from iTunes, software, and services stood at 19% year over year, and more players in the market for digital content might be a headwind for the iPhone maker.

Also, Fire TV will be a great launching pad for Amazon's ambitions to be a player in the gaming market. Amazon recently launched a game called Sev Zero and intends to launch a much large collection of graphically innovative games for its tablets and Fire TV.

Future retail growth
Amazon's retail presence is getting stronger than ever. In March, Amazon's same-store-sales growth stood at 26.2%, well ahead of eBay  (NASDAQ: EBAY  ) , which saw same-store-sales growth of 17.8%, according to ChannelAdvisor. ebay is increasingly leaning toward the Amazon model, as its fixed price sales increased 21.5% year over year, and its auctions-based pricing business declined 10% year over year. 

Amazon's revenue growth is likely to stay ahead of eBay and other e-commerce competitors, as the company has plans to grow its grocery business, Amazon Fresh, in the future. Bezos stated that the $299/year Prime Fresh offering will not only include fresh grocery items but also a huge selection of household and electronic goods numbering more than 500,000. The company even struck a deal with USPS to deliver Amazon items on Sunday, a notable win for the company.

In 2013, the number of sellers utilizing Amazon's Fulfillment by Amazon (FBA) by 65% year over year, a big increase for such a large platform. This sizable increase in third party (3P) sellers should boost Amazon's margins in the future. 

And the company is adding more FBA products from sellers to its Prime offering. And this leads to more value delivered to the end consumers as well. Sellers on Amazon's FBA platform have stated that they have seen increased unit sales upon joining FBA, a win-win for all involved.

The bottom Line
Amazon remains supremely well-positioned for long-term growth. The company champions the retail triangle of price, selection, and convenience, and as a result Amazon will be able to take more market share from offline retail. The company's culture of innovation is leading to newer product categories that will drive incremental upside for its revenues and earnings profile. The sell-off is a great way for investors to long the stock of Amazon.

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