Has Amazon Run Out of Steam?

Tech stocks have been punished the most following Brexit. While the event may have long-term implications on stocks that are exposed to the U.K., I think the overall selloff is overdone. Investors should use the rally to accumulate shares on the dip.

Amazon has been the worst performing FANG stock amid the Brexit event. With the stock having lost almost 5% of its value, I think investors should look to scoop it up on the pullback.

Amazon Prime

Nowadays, Amazon’s (AMZN) video servers have been very crowded as Amazon Video has become the third biggest platform that drove the most internet traffic in North America.
As per a report from traffic research firm Sandvine, Amazon has managed to grasp a third position behind longtime frontrunners Netflix and YouTube.

The rise of Amazon Video has been terrific as this service was not included even in the top ten three years ago. At present stage, Amazon Video accounts for around 4.3 percent of peak downstream traffic on fixed-access networks, which is fundamentally people streaming video at home.

It is very clear that Netflix has been the leading source of United States peak time internet traffic. In 2012, Netflix made up a fifth of downstream peak-time traffic, and that number has surged progressively over the years, as it now accounts for 35 percent of peak downstream traffic. After Netflix, YouTube has done a great job by consistently maintaining its peak downstream traffic, and this year it was liable for 17 percent of peak downstream traffic.

In the case of Amazon, rapid rise simply means that it has solidly grasped a third position, beating usual players, iTunes and BitTorrent. The company is driving video growth by efficiently bundling it with Amazon Prime. As per a report from Bernstein, around 80 percent of Prime subscribers also subscribe for video proposing, which is only accessible when it’s a part of a bundle with the loyalty program.

Apart from this, Amazon is dominating the market for worldwide cloud infrastructure as the company proposes free and unlimited cloud photo storage to its Prime members via its Amazon Photo service. Prime members can store unlimited photos on the company’s servers and accessing them from anywhere using an internet supported device. As a result, Amazon strategy to offer unlimited storage to Prime members could prove to be major growth driver.

Conclusion

Amazon has many growth drivers that can help push the stock higher in the long-run. Although Amazon’s valuation may seem insane, I think the stock can continue moving higher, which is why investors should be looking to scoop it up on the pullback.
Published on Jun 28, 2016
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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