Amazon's advantage over Apple
$Amazon(AMZN.US$ $Apple(AAPL.US$
Amazon has a big advantage over Apple because of its retail platform which acts as a very strong anchor for Prime membership. This allows Amazon to add new services to Prime increasing the overall value proposition and also gives it the ability to increase the prices. Apple does not have any similar anchor service.
Amazon has a big advantage over Apple because of its retail platform which acts as a very strong anchor for Prime membership. This allows Amazon to add new services to Prime increasing the overall value proposition and also gives it the ability to increase the prices. Apple does not have any similar anchor service.
Apple Music has a good number of subscribers but Amazon Music has also a strong subscriber base. In addition to this, Amazon has a huge market share in the smart speaker segment through its Echo devices. Amazon has been selling Echo devices at rock bottom prices and also giving huge discounts to Amazon Music Unlimited customers who use this service on Echo devices.
Amazon can also monetize the users through other services. It has been reported that Echo users do higher purchases on Amazon's retail platform. Hence, Amazon can afford to give discounts for Echo devices and music streaming. This has also forced Apple to sell HomePod Mini in sub-$100 category. But Apple would not be able to give discounts on music services similar to Amazon because it will squeeze its margins. Apple also does not have other services through which it can monetize customers in the low-margin music streaming business.
The smart speaker segment can have a halo effect on many services. This segment also has a very loyal customer base because users generally prefer to have additional smart speakers from the same brand to get a seamless experience. Apple's market share is in low single-digit despite launching lower-priced devices. Amazon has also leveraged its dominant position in smart speaker devices to launch a wide variety of devices which now includes even a home robot.
Apple is trying to build a base service through Apple One which is good enough for customers to try other services like fitness+. But Apple's lack of anchor service will hurt the growth of Apple One. Apple would need to rapidly expand the attraction of its TV+ to make it an anchor service within Apple One. This would require massive investment. At the same time, other players like Disney (DIS), Netflix (NFLX), HBO Max (T), and Amazon are also increasing their investments in this segment which will make it difficult for Apple TV+ to gain a big following.
Takeway
Apple is now competing directly with Amazon in music, video, gaming, and many other services. Apple One does not have an anchor service to attract customers similar to the retail platform for Prime members. Amazon's subscription revenues are also growing at a faster pace compared to Apple's Services segment growth. Greater discounts for Amazon music and higher investments in video streaming can make Prime membership the ideal "good enough" service which will limit Apple's subscription growth.
Apple is already trading at a very high multiple and any decline in margins or slow growth in subscription business could severely hurt the sentiments towards the stock and lead to a big correction.
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Win or Lost : Buy to huat big
poorlydrawnmcyt : The swallows of Capistrano return predictably every year. The opinion posting vultures also regularly arrive to feast on the purported demise of Apple. As usual, the only odorous stink is from vulture droppings. The Apple eco tree as expected, stands tall, healthy. Kudos and salutes to you Apple as you have positively enhanced the quality of Life for Incalculable billions. Best to All.
demonboyhalo : The bigger the dip, the cheaper the buy for AAPL.
My PT: $169.60
Adamjk : Bull. This is like comparing Walmart to Sotheby’s. Yeah.., I know they aren’t the same. Like apple and Amazon. Not buying this weak thesis.