Amazon.com, Inc. (NASDAQ:AMZN) can seem to do no wrong in the eyes of Wall Street as investors push its stock to new heights almost daily. Investors and analysts alike seem to be questioning whether there is any market the company can’t conquer, even as the news about the Ring acquisition circulates. So exactly what might Amazon do with the company and its technology? Analysts weighing in on Amazon stock offered up some ideas.
Clearly, investors are concerned about disruption in the home security space now that the behemoth Amazon is in the picture. Shares of home security stocks plunged on Wednesday, as AlarmCom Hldg Inc (NASDAQ:ALRM) stock slid more than 7% in early trading while ADT Inc (NYSE:ADT) stock tumbled more than 4%. Meanwhile, Amazon stock was up by about 1% out of the gate.
Analysts generally have two main ideas as far as what Amazon may be planning to do with Ring and its technology. The first is a broader integration of the company’s products with Alexa and its growing number of smart home products. Ring’s products already integrated with Alexa before the acquisition, so it’s a natural fit here. The company makes smart doorbells with built-in cameras that send video and audio to the owner’s smartphone.
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GBH Insights analyst Daniel Ives said in a note on the Ring acquisition that Alexa is “front and center” of Amazon’s smart home ecosystem. He estimates the market opportunity related to the Ring acquisition at about $20 billion over the next three years.
Ives suggests that the Ring acquisition will result in an even tighter integration with Amazon’s smart speaker products Although he does feel the more-than $1 billion the company is reported to have paid for the Ring acquisition is pricey, he feels it’s a smart move as the company looks to dominate the smart home industry. He continues to rate Amazon stock at Highly Attractive with a price target of $1,850 per share.
Stifel analyst Schlomo Rosenbaum noted that the Ring acquisition isn’t Amazon’s first in the home security market, making it seem like a major piece in a larger picture the company has been building quietly for quite some time. The online retailer has already been selling its Cloud Cam, its own home security camera, for quite some time, so the Ring acquisition should fit in nicely with that. The company also acquired video doorbell maker Blink in December, although Ring’s products seem to be more popular with consumers. It was believed that the Blink acquisition was aimed at acquiring the company’s battery lengthening tech.
In addition to smart doorbells with cameras, Ring also offers home security cameras, and it is reportedly working on a “much more comprehensive Do It Yourself” offering, according to Rosenbaum. The kit will apparently include a mix of motion detectors, sensors for doors and windows, and flood and smoke detectors.
In addition to integration with Alexa and its Echo devices, Credit Suisse analyst Stephen Ju suggests that Ring’s technology may be destined for integration with Amazon Key. Consumers sign up for Key to allow Amazon drivers to place packages inside their homes rather than on the porch. The system utilizes keyless technology, but so far, it doesn’t sound like things are going very well.
One of the biggest issues with Amazon Key has to do with home security systems, as delivery drivers have apparently been tripping alarms accidentally when trying to drop off packages inside customers’ homes. Homeowners must remember to turn their home security system off when they’re expecting a delivery inside their home, which rather defeats the purpose of having the system in place at all.
A tightly integrated product like Ring’s smart doorbells and cameras could smooth out the friction that customers have been experiencing with the Amazon Key system. We would also note that adding Ring’s technology might convince more consumers to use Key because the integrated cameras enable them to watch drivers via their smartphone as they open the door to deliver a package.
Amazon stock initially spiked 1% in morning trades, climbing to a new high of $1,528.70 before reversing course but remaining in the green.