The ever-changing landscape of this data-driven world has created a niche for smart home products especially smart speakers. Further, the emergence of virtual assistants embedded with artificial intelligence (AI) techniques fueled the demand for smart speakers. In fact, these speakers are making daily life easier by handling small but inevitable tasks smartly and efficiently.
Moreover, rapid proliferation of virtual assistants and improving AI skills are aiding these speakers become more advanced with each passing day. This is likely to boost the adoption rate of smart speakers further in every possible sectors starting from residential homes, smart offices, automobiles to hospitals.
Given the scenario, we believe that the smart speaker market holds immense growth potential which is alluring enough to attract major tech companies to foray into it and exploit the growth opportunities.
Currently, the significant players in this market includes the likes of Amazon (AMZN - Free Report) , Apple (AAPL - Free Report) , Alphabet’s (GOOGL - Free Report) Google, Microsoft (MSFT - Free Report) , Samsung , Alibaba (BABA - Free Report) , Yandex (YNDX - Free Report) and Xiaomi.
All these companies are leaving no stone unturned to bolster presence in the smart speaker market, which as per a report from MarketsandMarkets, is expected to reach $11.8 billion by 2023 at a CAGR of 34.4% between 2018 and 2023.
Further, a report from Global Market Insights indicates that the worldwide shipments of these speakers are projected to witness a CAGR of 33% between 2018 and 2024.
Growing Worldwide Penetration
The report also suggests that the penetration rate of smart speakers is highest in North America, especially in the United States, thanks to technical awareness among the people in the country. Further, higher adoption rate of new and advanced technology can be attributed to this increasing penetration.
According to data from a survey conducted by Adobe’s (ADBE - Free Report) analytics unit, the penetration rate of smart speakers in U.S. households is expected to reach 48% by the end of 2018.
Apart from the United States, there are four more countries where the abovementioned companies are gaining traction, namely — the U.K., China, Germany and South Korea.
Reportedly, the installation base of these speakers is expected to reach a record high of 100 million in 2018, where the United States leads the pack with 64%. China is projected to hit 10%, UK’s base stands at 8% while Germany is anticipated to witness growth of 6%.
Meanwhile, South Korea is gaining traction too. Notably, it is anticipated to make up 3% of worldwide installation base.
Notably, Amazon Echo, Google Home, Apple’s HomePod, Alibaba’s Tmall Genie, Samsung’s Galaxy Home, Yandex.Station and Xiaomi’s Mini AI smart speakers are well poised to gain momentum in this rapidly growing market.
Per the latest Canalys report, the total shipment of these speakers collectively stood at 16.8 million units in the last quarter.
Stocks to Watch
With the increasing adoption rate of smart speakers globally, we believe the following stocks are worth considering.
Amazon, which holds the highest share in the global smart speaker market driven by robust features of Echo devices, is well poised to reap benefits from this space. Further, several device models of Echo with affordable price will continue to aid its market share.
Moreover, improving Alexa skills are likely to modify the Echo features. Currently, the Alexa Skills store offers more than 45K skills. Additionally, customers can now use Alexa to control more than 13K smart home devices from over 2,500 unique brands. The Canalys report shows that the company shipped 4.1 million Echo devices in the last quarter, accounting for 24.5% of the total shipment.
Additionally, the company’s strong focus toward expanding footprint in the global market is a major positive. Amazon launched these devices in France during the second quarter. Moreover, it launched Echo Spot in India and Japan. Further, it is gearing up to launch Echo in Italy, Mexico and Spain by the end of this year.
Currently, Amazon carries a Zacks Rank #2 (Buy).
Alphabet’s Google has been gaining traction in this market over the past few quarters with its Home devices. Moreover, the company’s continued efforts to keep pace with Echo devices are strengthening its market position. Further, the company is well poised to rapidly penetrate the developing countries driven by its low cost speakers and ability to answer search questions quickly.
Additionally, Google is aggressively looking into deals with smart home gadget makers to improvise its Home devices further. Moreover, the company’s improving AI techniques are benefiting Google Assistant skills, which is likely to enhance the features of these devices.
In the second quarter of 2018, the company shipped 5.4 million units of Home devices and accounted for 32.3% of the total shipment leading the roster.
Alphabet carries a Zacks Rank #3 (Hold).
Apple entered this particular market in the beginning of this year with its HomePod, making itself a late entrant. However, the company, which has a loyal customer base for its iPhone, is also gaining momentum in the smart speaker market with its brand loyalty and expanding global footprint. Further, superior music quality in HomePod gives it an edge over other speakers in the market. Further, Apple unveiled its low cost device namely, HomePod Mini in the last quarter. This is likely to boost its sales figure.
Given these factors, the company’s installed base is projected to reach 10% by 2020.
Additionally, the company is working on integrating the next generation of HomePod with Face ID technology, with the help of which the speaker will be able to scan the person nearby and automatically set up music, thermostat and more as per user preference.
The company has a Zacks Rank #2.
Microsoft has entered the market with its virtual assistant called Cortana which made its debut in Harman Kardon Invoke smart speakers. This move is in sync with the company’s strategy to reap benefits from this high potential market.
Its 360 degree sound feature, hands-free call and video features along with compatibility with smart home products will help the company in gaining momentum in the market. Further, the company is reportedly working on its own smart speaker with the help of its advanced smart home control technologies and Cortana.
Currently, Microsoft sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Recently, Yandex also made a foray into this market with the launch of Yandex.Station, which is equipped with its Russian-speaking voice assistant called Alice. The speaker has Bluetooth capabilities, powerful audio specs and HDMI port for streaming television.
Further, it has the ability to stream video from Yandex’s own platform KinoPoisk and other Russian video streaming services like Amediateka. All these features are likely to aid Yandex’s position in the Russian smart speaker market.
Currently, Yandex carries a Zacks Rank #3.
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