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Amazon's Lennar Tie-Up to Aid Growth in Smart Home Market

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Amazon (AMZN - Free Report) is leaving no stone unturned to bolster its presence in the smart home market with its own voice assistant Alexa and a strong portfolio of home automation products.

The company’s tie-up with Lennar (LEN - Free Report) , a home construction company, is likely to be a win-win situation for both the parties.

Lennar specializes in building smart homes with built-in Wi-Fi in order to accentuate the experience of Amazon’s Alexa. Though Alexa will remain the prime focus, the smart homes will also feature Echo range of smart speakers, Dash Buttons, Blink’s wireless security camera, Ring’s internet connected video doorbells to name a few.

Lennar’s first 15 model homes will be located in Dallas, Atlanta, Los Angeles, Miami, Orlando, San Fransisco, Seattle and Washington DC. However, the company intends to deliver 35k homes equipped with Amazon’s home automation products across 23 U.S. states this year.

Showcasing of Amazon’s Home Products

The latest move will showcase Amazon’s home automation products in the model homes. This will provide Amazon an experience centre for its home products, which is anticipated to attract customers to its platform by delivering better services and experience to the owners.

Moreover, the partnership gives a significant boost to Amazon’s clientele, leading to construction of more smart homes with built in home automation products and consequently generating more revenues.

Further, the latest deal will reinforce Amazon’s dominant position in the market.

These factors are likely to provide Amazon a competitive edge in the home automation space, where it is facing competition from the likes of Alphabet’s (GOOGL - Free Report) Google, Apple (AAPL - Free Report) , Alibaba (BABA - Free Report) and Facebook (FB - Free Report) .

Shares of Amazon have returned 37.1% on a year-to-date basis, outperforming the industry’s rally of 21.2%. Moreover, the return is better than Apple, Facebook, Alibaba and Alphabet’s gain of 11.2%, 5.4%, 21.3% and 3%, respectively.

Growing Smart Home Market

The smart home market is growing at a rapid pace with the development of innovative home automation products like voice assistants, voice controlled devices, internet connected security products and so on. Moreover, increasing use of internet and smartphones worldwide is giving rise to demand for these products.

Per the data from Markets and Markets, the global smart home market is expected to reach $137.91 billion by 2023, growing at a CAGR of 13.6% between 2017 and 2022.

Further, the United States is likely to be the high growth market for smart homes. This is evident from the data provided by Statista which shows household penetration rate in the country is expected to reach 32% in 2018. Further, revenues in U.S. smart home market are projected at $18.9 billion for this year. Additionally, the revenues in this market are expected to reach $32.8 billion by 2022 by growing at a CAGR of 14.8% between 2018 and 2022.

Its no wonder that the tech companies are trying to increase their footprint in this rapidly growing space. However, Amazon enjoys a first-mover’s advantage in this market. The increased adoption of Alexa and Echo devices has helped the company gain significant prominence within a short span of time.

Competition Intensifies

Nevetheless, competition is increasing for Amazon. In the area of voice assistants, Google’s Assitant and Apple’s Siri provide tough competition to Amazon’s Alexa. The global market for voice assistants is expected to grow at CAGR of 39.27% between 2017 and 2023 and reach $7.8 billion by 2023.

Further, Facebook is planning to add a feature to its Marketplace by collaborating with three firms — Handy, HomeAdvisor and Porch. The new update will allow the users to find and contact local contractors for home improvement services quickly. This is going to compete with Amazon’s Home Services which provides similar kind of services.

In case of voice controlled speakers, the competition is getting stiffer. Per a latest report by Strategy Analytics, Google with the introduction of Google Home Mini accounted for 26.5% of market share, up from 12.5% in the year-ago quarter.

Apple’s HomePod which was launched early this year gained traction by acquiring 6% market share. Also, Alibaba was successful to acquire 7.6% share.

On the other hand, Amazon with several iterations of the Amazon Echo maintained its dominant position in the smart speakers market by acquiring 43.6% market share in the last quarter. However, the company’s share has come down from the year-ago quarter, when it accounted for 81.8% of market share.

Currently, Amazon carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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