Amazon primed to deliver continued success with innovation based strategy

While it may not be winning any supporters for its tax practices, the firm goes from strength to strength and the future looks rosy for the world’s biggest online store.

Amazon logo
Source: Bloomberg

The digital retailer has been back in the headlines for all the wrong reasons this week, with the firm paying a measly £11.9 million in taxes on its UK division despite amounting £5.3 billion in UK based sales. Nevertheless, the savvy/immoral – delete accordingly – accounting practices do little to get over the fact that Amazon is an incredibly successful business and one which is at the forefront of consumerism worldwide.

The online giant is a prime example of a firm which is constantly at the forefront of innovation, from the way it structures its offerings, to the way its services are delivered. Whilst the likes of drone delivery services haven’t taken off quite yet, robot driven fulfillment centres show that the sky is the limit for a firm that clearly invests heavily in R&D advancements. The introduction of Amazon Prime – a coupling of next day delivery and the firm’s video service – shows a willingness to think outside the box in how products are offered and packaged.

As such, unlike some firms which will sporadically innovate and sit back to admire their efforts, Amazon are the type of firm to continue to break boundaries. However, in the form of Alibaba, Amazon has finally found an equally large advisory who can similarly dominate in the market. But is the town big enough for the two of them?

With the development of the Prime service, Amazon has not only provided a consistent revenue stream that encourages consumer loyalty, but has also managed to derive funds from consumers without them even using their service, much like a gym membership.

The question is to what extent will Alibaba seek to gain ground from Amazon in the Western world compared to its new exploits in China? This is somewhat less known and will play out over time.

From a technical standpoint, the weekly chart shows that the trend is bullish, yet we have seen significant choppiness throughout 2014. That being said, the outlook is still firmly geared towards further upside which is expected to remain in place as long as price remains above $413.40. 

Amazon weekly chart

With the daily stochastic having bounced off the top of the symmetrical triangle, it is clear that momentum is consolidating and thus price is fairly likely to follow. As such, I would not be surprised to see the price move lower in the near future. Yet ultimately I expect price to come out of this phase to the upside and as such, while price remains above $413.40, I am bullish and see $50 as a likely achievement in the coming months.

Amazon daily chart

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