1 Reason To Keep Believing In Amazon.com, Inc.

As questions cloud its future and doubts soar, Amazon lays plans to disrupt another multi-billion dollar industry.

Sep 2, 2014 at 1:37PM

If appearances were everything, Amazon.com (NASDAQ:AMZN) would be a company down on its luck in more ways than one.

AMZN Chart

Amid, what I've argued is little more than a perception problem, investors have fled Amazon's shares en masse so far this year, even as consumers continue to flock toward the world's most dominant e-commerce company.

Thankfully, we don't take much stock in appearances alone here at the Fool.

I've been following Amazon with great interest in the wake of its recent earnings-fueled sell-off, keeping an eye to a potential buying opportunity for an amazing company at a somewhat reduced premium.

And the more I research it, the more I become convinced that, while Amazon's prospects might have reached a recent low in the investing community's eyes, Amazon remains one of the most disruptive and relentlessly innovative companies around. Thankfully, Amazon recently helped prove my point by boldly setting its sights on another multi-billion dollar growth industry.

Amazon Local Register: A winning move 
Earlier this month, Amazon introduced its new mobile payments solution, Amazon Local Register. And although many media outlets noted the move, few seemed to appreciate its big-picture significance.

Amazon Local Register

Source: Amazon

In typical Amazon fashion, Amazon Local Register appears to offer potential users a quick, seamless mobile payments solution akin of Square's or PayPal's increasingly popular mobile card reader. However, perhaps the most defining aspect of Amazon's new mobile card reader is its pricing. As should come as no surprise for those familiar with its corporate philosophy, Amazon plans to compete aggressively on price against the industry's already-established players in hopes of gaining a quick foothold. See for yourself.


Basic Pricing

Amazon Local Register






Sources: Amazon.com, PayPal, & Square

However, the above table doesn't even fully convey how aggressively Amazon is attempting to steal customers away from the competition. Users that sign up for its Amazon Local Register service before October 31, 2014 will received special discounted pricing of only 1.75% until the end of 2015; a serious deal-sweetener. Make no mistake, this is a plain and simply land grab tactic on Amazon's part, and one that seems likely to work.

Bolstering the big picture
Establishing a presence in the emerging growth market for mobile payments alone is likely to have an accretive effect on Amazon's overall financial performance. However, for all the isolated benefits Amazon Local Register should provide, the overall network effect it should afford Amazon's broader e-commerce business is the true victory for Amazon and its shareholders.

Although its by no means a perfect comparison, the economics of eBay's (NASDAQ:EBAY) PayPal help shed more light on why a payment service makes so much sense for an e-commerce giant like Amazon. Per eBay's 2013 10-K, PayPal produced an enviable operating margin of roughly 24% last year, versus Amazon's razor thin 1% operating margin in that same period. 

This gets at the two-fold benefits that a product or service like Amazon Local Register present. For starters, it should help incrementally drive more usage of Amazon's e-commerce platform as merchants buy and sell goods and have those orders fulfilled through Amazon's increasingly powerful third-party fulfillment business. I see this as the more marginal of the two benefits, full disclosure.

In my eyes, the vastly more impactful benefit of Amazon Local Register is that it will provide yet another high-margin revenue stream that can help buoy Amazon's other low or even negative margin businesses, most notably its core e-commerce platform. Amazon's famous for using higher margin businesses, such as its Amazon Web Services, to help support its constant push to offer users the lowest prices through its online marketplace. And even though Amazon clearly plans to compete aggressively on price with Local Register, thereby diminishing its cushy margins to an extent, there's little question that moving into this highly lucrative space will provide some new degree of financial flexibility for other money-losing areas in Amazon's corporate folds.

While this story is still unfolding, it appears that Amazon has a winner on its hands with its Amazon Local Register product.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Andrew Tonner owns shares of eBay. The Motley Fool recommends Amazon.com and eBay. The Motley Fool owns shares of Amazon.com and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information