Three new products from the tech industry have been formally announced or are being rumored about in the media.
Will these gadgets from Amazon.com (AMZN -1.54%), Google, (GOOGL -0.27%) (GOOG -0.20%), and Apple, (AAPL 0.95%) be real or just gimmicks to get name or brand recognition? And how should investors approach these companies right now?
Drone delivery
Amazon wants to get packages to your home using drones. In keeping with an unrelenting company focus on customer service, which is job No. 1 according to CEO Jeff Bezos, the project could reduce the delivery times from its fulfillment centers.
Source: Amazon
Amazon will have to jump over a couple of tall hurdles in order to make PrimeAir a reality and that could take some time:
- Federal, state, and local rules and regulations, some which have not been created yet, will have to be addressed.
- Although used extensively by the military for a few years, drones used commercially are relatively new and the technology has not been vetted. A few bugs may have to be worked out. Imagine the challenge of replacing hundreds or thousands of trucks now driving around on our roads with unmanned aerial vehicles? We don't want traffic jams in the sky and objects falling to the ground.
Amazon probably made the announcement to create a "wow" factor. For now the use of drones by the company is a few years away at best and will not appreciably help Amazon much. The drones are a gimmick.
A more feasible effort that the company is thinking about, and one that Amazon might actually succeed at, is its own ground-based package delivery service which would compete with FedEx and UPS.
A topic probably more important to Amazon investors is the valuation. The stock price has taken a big hit so far this year as shareholders may have finally realized that it no longer justifies a big premium. This is in spite of double-digit revenue growth, which the company regularly reports year after year. Even after the 30% drop, Amazon shares still sport a triple-digit multiple.
It might be wise to stay away from Amazon for awhile until the valuation becomes more reasonable.
Fragile Glass
Google has been developing the wearable device Google Glass for some time and it finally went on sale, abet for only a single day, to the general public recently.
Source: Wikipedia
The technology is very innovative and certainly is an advertisement to the company's technological prowess. But is the product practical and commercially viable? At the current price point of $1,500 it doesn't seem like it could be a big seller and most likely will be a niche product. Google will not be able to profit much from it.
Google does have a lot of good things going for it, including a dominant position in its cash-cow business: search. Investors can still benefit from growth there as Google expands into emerging markets. Ironically, one way that the company may try to do that is to use drones to provide wireless Internet access in remote areas in order to increase its user base. Google recently acquired Titan Aerospace, which is a maker of unmanned aerial systems.
Google stock may have a little left in its tank if the company can continue to be successful in areas other than products like Glass.
And one more thing
Apple typically announces new gadgets in the fall so investors might have to wait a bit to get a better feel for future growth prospects for the company.
History has been good to Apple. It just released 2014 Q1 results and reported increased shipments of its flagship product, the iPhone. The most profitable resident of the Apple stable, it provides more than half of overall company revenue. Sales of iPhone 4s, 5s, and 5c far exceeded expectations of most Wall Street analysts. Can the growth continue?
There has been plenty of speculation about the next version of the device. Some reports indicate that the display will be larger as Apple addresses the needs of users who want a bigger screen and to compete more successfully against Android-based smartphones. Others point to a new type of display featuring "glass" produced from sapphire crystals at a brand new factory in Arizona.
If the past is any guide, Apple will introduce some new technology or feature that has the potential to move the needle for the company. The iPhone 6 will not be a gimmick in the realm of Amazon drones or Google Glass. Investors should keep a sharp lookout for what comes out of the labs in Cupertino. A home run from there could really pump up the stock.
Foolish conclusion
Investors trying to gauge the impact of three high-profile gadgets that have yet to hit the market from three of the biggest names in tech probably need to see what Apple has up its sleeve and not look in Mountain View or Seattle for guidance.
The next version of the iconic iPhone will probably move the needle more than drones that have yet to fly or smart glasses that have not been worn by many.
