Amazon’s (AMZN) stock performance depends in part on how the company positions itself for the future. The Jeff Bezos-founded company is leaning more on videos and social media features to fuel growth in its flagship retail business. In that strategy, Amazon has TikTok and Netflix (NFLX) on its target.
Although cloud computing has become Amazon’s most profitable business, the retail division remains its largest operation. In Q2 2022, for instance, the cloud business contributed about 173% of Amazon’s operating profit while the retail unit accounted for about 84% of the total revenue.
Apart from item sales, Amazon’s retail division also houses the company’s advertising and subscription services. Therefore, an increase in shopper visits to the retail platform can also generate more advertising and subscription sales for Amazon.
Amazon Working on TikTok-Like Feature to Draw More ShoppersTikTok’s video-sharing feature has become a hit with young people. From Meta Platforms (META) to Alphabet (GOOGL), various technology companies are trying to copy TikTok features in an effort to replicate its success.
Amazon has joined the race to offer TikTok-style features on its platform. The company is testing a feature that shows users photo and video feeds about products sold on its retail platform, according to a Wall Street Journal (WSJ) report citing people familiar with the matter.
Shoppers can share the streams with others or purchase the featured products. Amazon’s TikTok-like feature, dubbed “Inspire”, is initially testing internally with staff. If launched to the public, the feature may help Amazon boost engagement with its shoppers. That may in turn lift the company’s retail sales.
Amazon Considering Poaching Netflix’s Star Film ExecutiveAmazon is looking for someone to lead its expanding entertainment unit, according to a separate WSJ report. The company has considered Netflix’s studio head Scott Stuber for the role. Stuber is credited for many of Netflix’s hit films.
At Netflix, a recent string of subscriber losses has sparked a rush to cut costs, which have resulted in job cuts. However, Amazon is still showing strong appetite for more spending as it works to draw more subscribers to its video offering.
While people can purchase a standalone Amazon Prime video plan, Amazon primarily offers the video as part of its Prime membership program. The program has left Amazon build a loyal customer base that continues to fuel its retail business. In the latest update, Amazon revealed having 200 million Prime members globally.
Apart from paying the annual or monthly subscription fee, Prime members also shop on Amazon more often. Moreover, Prime members usually spend significantly more on Amazon shopping in a year than the regular customers.
Amazon’s attempt to poach a star Netflix film executive also highlights the intensifying competition among video streaming providers. Offering great content helped Netflix grow rapidly and rivals are keen to replicate that strategy. In addition to Amazon, Walt Disney (DIS) and Comcast (CMCSA) are the other major companies waging a streaming war with the market leader Netflix.
Is Amazon Stock Rated a Buy?Although Amazon’s stock has gained almost 33% in the past three months, it is still about 24% below its 52-week peak of $188. Wall Street remains bullish on the stock.
According to TipRanks’ analyst rating consensus, AMZN stock is a Strong Buy based on 39 Buys and one Hold. The average Amazon stock price prediction of $176.04 implies 24% upside potential.
Amazon stock is a favorite among retail investors. TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Amazon. In the past 30 days, 13.2% of the top-performing portfolios tracked by TipRanks increased their exposure to AMZN stock.
Final ThoughtsFacebook and Google gained from offering TikTok-like features and Amazon might see benefits from doing the same. The efforts that Amazon is making have the potential to drive significant growth in its retail business.
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