Amazon.com, Inc. Fires Into the Streaming Market

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After an amazing first quarter where net sales increased to $19.74 billion, up 23% from $16.07 billion in first quarter 2013, Amazon.com (NASDAQ: AMZN  ) and its new video streaming technology, Fire TV, are heating things up in the streaming arena.  The company's entrance into the living room is a definite milestone to its profitability and long-term growth potential. 

Out-streaming the competition
Earlier last month, Amazon premiered its TV streaming hardware, Fire TV, which is a small box that plugs into an HDTV and gives viewers easy and instant access to Netflix (NASDAQ: NFLX  ) , Prime Instant Video, Hulu Plus, WatchESPN, SHOWTIME, low-cost video rentals, and more. Fire TV also brings photos, music, and games to the living room through apps. 

Prime Instant Video is the only U.S. online subscription streaming service that enables online and offline viewing. This may factor into why Instant Video streams have tripled year over year. Qwilt, a company that measures growth in online video usage, reported that Amazon is now outperforming Hulu and Apple.

The Qwilt blog reported that in March of 2014, traffic volume of consumer consumption increased by 94% year over year, and volume in some U.S. operator networks increased by 278%. These numbers moved Amazon to third place in Video Site Ranking, bumping Hulu and Apple down one notch to fourth and fifth place respectively. Netflix remained number one, and Youtube continues to hold second. 

Exclusive viewing
While Netflix remains the number one spot for online viewing, Amazon is making its way toward catching up as far as quality of content is concerned. Not only did Amazon just sign a deal with HBO to stream award-winning content to Prime Members, but it also just gave the green light to two new original pilots: The Cosmopolitans; written, directed, and produced by Academy Award nominee Whit Stillman; and Hand of God, starring Golden Globe winner Ron Perlman. 

While Netflix is renewing its celebrated series Orange is the New Black and has seen success with House of Cards, starring the legendary Kevin Spacey, Amazon is developing its own original content in addition to its extensive collection of quality programming.   

Amazon Prime also offers the huge library of television and online streaming content at no extra cost to Amazon Prime Members. However, Netflix is now looking to increase subscription fees in order to offset content costs. As it stands, Amazon Prime costs $99 per year for non-students; that comes out to around $8.25 per month. Netflix is considering adding $1 or $2 to it's $8 subscription fee, which means Amazon will soon offer more for its membership fees at a lower cost.  

Foolish takeaway
Over the last five years, Amazons' stock has increased by approximately 295%.  Analysts are expecting earnings for Amazon to grow at an average annual rate of 28% over the next five years, while Apple is expected to grow at 11.9%, and Netflix at 24.1%. Although all three companies are expected to grow, Amazon increase is projected to be the most significant of the three.   

As the battle for your living room begins to heat up, the time comes to review how we look at television -- as consumers and as investors. Traditional cable is dying and video streaming is becoming the new norm.

While Netflix, Google, and Apple scramble to become the next big entertainment providers, Amazon is making moves (like a dark horse) to take its place on the main stage. Most analysts rate Amazon as a strong buy and I certainly agree. 

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 


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  • Report this Comment On May 05, 2014, at 10:18 PM, DaytonJohn wrote:

    "Over the last five years, Amazons' stock has increased by approximately 295%. Analysts are expecting earnings for Amazon to grow at an average annual rate of 28% over the next five years, while Apple is expected to grow at 11.9%, and Netflix at 24.1%. Although all three companies are expected to grow, Amazon increase is projected to be the most significant of the three. "

    Ms. Gooden, when comparing earnings "growth" isn't it a little disingenuous to compare Amazon and Neflix with Apple when Amazon and Netflix have tiny earnings and are therefore starting at a very low base while Apple has monster huge earnings in the billions of dollars every quarter. Last quarter Apple made about 4 times as much money as Amazon and Netflix have made in their entire history combined. Also, you might want to advise readers that future earnings growth projections for Amazon for the last several years have been grossly over optimistic and brought down nearly every quarter. For example, in 2011 Amazon was projected to earn over $5 a share in 2012 and over $7 a share in 2013. Amazon ended up losing money in 2012 and making a paltry $.59 in 2013, huge misses by any standard. Given this track record I would take any future earnings growth projections for Amazon with a grain of salt.

  • Report this Comment On May 07, 2014, at 3:11 PM, snachum wrote:

    forgot to mention amazon P/E is about 450 against apple's 14 and netflix 120.

    amazon needs to grow 100% each year for the next ten years to justify the stock price. and with ali-baba on the move and recent lower then expected growth this stock is about to plunge. do not buy.

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