2022 hasn't been a fun year for Amazon (AMZN -0.07%) investors, whose stock is down 48% year to date. But the words of investing legend Warren Buffett, "be greedy when others are fearful," might ring true for those with a little bit of patience.
Let's discuss two new business opportunities that could help power Amazon's growth over the coming decades.
The next big movie studio?
First an online bookstore, then an e-commerce giant, and now a diversified tech conglomerate, Amazon has depended on its ability to rapidly seize new opportunities in the economy. The company's recent investments in film entertainment video streaming suggest it hasn't lost that adventurous spirit.
In March, Amazon spent $8.5 billion to acquire the film and television studio MGM, known for iconic film franchises like James Bond and Rocky, along with more than 4,000 other film titles and 17,000 TV episodes.
At the time, many industry watchers believed the move was designed to boost intellectual property on Amazon's streaming platform. However, the November announcement of plans to plough $1 billion a year into theatrical releases sheds more light on the long-term strategy.
More than just using streaming as a loss leader for Amazon Prime, management may be looking to turn the box office (which generated $21.3 billion last year) into a full-fledged growth driver. While it could take decades for this strategy to play out, the MGM acquisition gives Amazon the human capital and industry relationships needed to tackle the opportunity.
A natural edge in digital advertising
Amazon's deep pockets and massive scale represent an economic moat that can help it tackle synergistic industries like digital advertising, and the company is diving headfirst into the opportunity.
According to Business Insider, Amazon is already the third-biggest advertising company behind Alphabet's Google and Meta Platforms' Facebook, generating a whopping $31 billion in ad revenue in 2021.
With 300 million active users, Amazon's platform has a significant reach, which makes it valuable for advertisers. Ads can also be more targeted at consumers because of the huge amount of search and shopping data the company gathers from its users.
Image source: Getty Images.
Just like with MGM, Amazon is using this as a chance to unlock synergies with acquired subsidiaries -- in this case, Whole Foods (a business acquired for $13.7 billion in 2017). The company is already placing ads on a variety of screens and signage located within these brick-and-mortar stores. And long-term plans could include placing ads on smart shopping carts, check-out kiosks, and even glass refrigerator doors.
Investing with a long-term perspective
Amazon's core e-commerce operations remain under pressure because of macroeconomic challenges like inflation and a possible recession. And it is tempting for investors to get caught up in these near-term headwinds -- especially as they put pressure on the company's stock price.
That said, long-term investing is the key to sustainable success in the stock market. And for Amazon, the future looks bright. The tech giant's massive scale and capital base allow it to create value for investors through new opportunities like film production and digital advertising. Who knows what new business opportunities could be next?
