How Will Amazon (AMZN) Stock React to Its Smart-Home Devices Plan?

NEW YORK (TheStreet) -- Amazon.com Inc. (AMZN) is said to be increasing its staffing at its Silicon Valley hardware unit by 27%, over the course of the next five years, in order to expand its lab as its tests out Internet-connected "smart-home" devices, including a one-button accessory for ordering supplies, Reuters reports.

Amazon's CEO Bezos is looking to increase productivity in the company's hardware strategy, despite a less than excited response to the Amazon's latest device, the "Fire" phone, sources told Reuters.

Amazon came to an agreement with the state of California in June, allowing the technology company to grow its full time payroll staff by at least 3,757 employees by 2019, and giving it a $1.2 million tax break, Reuters added.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Amazon is going to invest $55 million in the operations of "Lab126," as the company's hardware unit is called, in order to test home connected devices, as the company continues to compete against Apple (AAPL) and Google (GOOGL) , sources said to Reuters.

One device Amazon is said to be testing is a Wi-Fi unit that can be placed in the kitchen or a closet allowing users to order a variety of products with the press of a button, but sources cautioned Reuters about the possibility these devices may never make it to market.

Shares of Amazon are up 0.53% to $325.36 in pre-market trading on Wednesday.

Separately, TheStreet Ratings team rates AMAZON.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMAZON.COM INC (AMZN) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and relatively poor performance when compared with the S&P 500 during the past year."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.2%. Since the same quarter one year prior, revenues rose by 23.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although AMZN's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average.
  • 36.46% is the gross profit margin for AMAZON.COM INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.65% trails the industry average.
  • Net operating cash flow has declined marginally to $862.00 million or 2.04% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, AMAZON.COM INC has marginally lower results.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 1700.0% when compared to the same quarter one year ago, falling from -$7.00 million to -$126.00 million.
  • You can view the full analysis from the report here: AMZN Ratings Report

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