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Amazon's (AMZN) Echo Equipped to Deliver Meals for Free

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In its latest gambit to spread Alexa’s influence, Amazon.com, Inc. (AMZN - Free Report) upgraded Alexa with the ability to order food from Amazon Restaurants.

For the last one year, the stock has outperformed the Zacks Internet Commerce industry. It has returned 29.01% compared with the industry’s return of 25.98%.

This prime exclusive service is available in 20 cities, including Chicago, Austin, Atlanta, Brooklyn, Baltimore, Columbus, Houston, Dallas, Portland, Phoenix, Los Angeles, Miami, Minneapolis, Manhattan, Orlando, Northern Virginia, San Francisco Bay area, San Diego, Tampa and Seattle.

Prime members using Echo and Echo Dot will need to say “Alexa, order from Amazon Restaurants,” in order to get a meal delivered for free, within an hour.

Notably, Amazon restricts this skill to reordering only. It works only when one is reordering food from a particular Amazon Restaurant. The voice service reads a customer’s order history and extracts meal options available for reorder. The order is delivered to the customer’s default address.

Advantage Over Early Movers

Online food delivery currently occupies just a fraction of the overall food delivery space, with Grubhub and Yelp (YELP - Free Report) -owned Eat24 holding the strongest positions.  Thus, it appears that Amazon is trying to differentiate itself, as it accelerates its push into a massive, but relatively untapped market.

Power of Echo

Calling Amazon the world’s largest online retailer would be too little to reflect its enormous power. The company capitalizes largely upon this power. It would be apt to call it a technology mammoth, with a huge potential, poised to rule the technology world in the years to come.

The company has converted the nascent smart home market into a potential area of growth, in a very short time, backed by its Alexa-powered echo devices.

A few months back, it was not clear where Echo is headed; but with third-party partnerships, it was expected that Amazon is making Alexa the central point of connecting IoT devices used in any household.

However, it appears that Echo is well poised to penetrate every stream of business on the back of Amazon’s robust performance. The company has accelerated signing on third-party device makers, such that these companies integrate Amazon’s voice assistant – Alexa – which brings them into the respective eco systems. It’s a reflection of the early-mover advantage that Amazon is building up in the nascent smart home market. Currently, Alexa is equipped with thousands of skills and can connect to any stream of business. We believe that Amazon has just started to unfold what it could do with Alexa.

Amazon.com, Inc. PEG Ratio (TTM)

To Conclude

IoT devices/technologies are unlikely to have a very big impact on results right now (revenue contribution won’t be material near term), but these could largely support the rest of the business by making purchase from Amazon.

Zacks Rank and Stocks to Consider

Currently, Amazon is a Zacks Rank #4 (Sell) stock. A better-ranked stock in the broader technology sector includes Daktronics Inc. (DAKT - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

For the current year, the consensus estimate for Daktronics has jumped by 45.5%, in the past 60 days.

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