Amazon's latest acquisition is a major hint about the company's plans for its Alexa voice assistant
- Amazon acquired smart doorbell maker Ring for what some reports speculate could be as much as $1 billion.
- The investment indicates that the tech giant is serious about "doubling down" on its efforts to make the Alexa platform the center of its app universe, a Macquarie analyst said.
- Watch Amazon's stock price move in real time here.
Amazon's acquisition of Ring says a lot about it's next big driver of growth.
After buying smart doorbell maker and "Shark Tank" reject Ring, Amazon may be "doubling down" on its Alexa platform in an attempt to boost its home automation efforts, Macquarie analyst Benjamin Schachter argued.
Though the two companies did not disclose financial terms, some reports value the deal at more than $1 billion.
Amazon appears to be making a significant investment in developing a high-tech smart home ecosystem centered on Alexa that not only serves basic functions, like turning on the TV, but can allow customers to order retail goods and groceries to be delivered straight to their homes.
"AMZN clearly believes that it has found its next growth driver and we expect to see even more aggressive M&A and R&D spend around the platform," Schachter wrote in a note to clients.
The company could lower its hardware prices to breakeven levels while increasing its subscription models and tie-ins with Prime, Schachter said.
Alexa will eventually be the nexus for all of Amazon's applications and will lead to a pathway for third-party monetization, he said, although the company has indicated that will not be the focus in the short-term.
The acquisition of Ring also helps Amazon more directly compete with Google's Nest Hello, a smart video camera doorbell that launched last year. Nest Hello has a leg up over Amazon because Google's doorbell has a facial recognition feature, but Ring recently adjusted its terms of service to include a possible future facial recognition feature as well.
Schachter said Amazon was likely pressured to buy Ring as opposed to continuing to partner with the startup because Google and Apple may have been bidding against it.
"AMZN needs to keep its Alexa momentum going and keep its competitors from finding their footing," Schachter said.
In October, the company rolled out Amazon Key, a camera-enabled smart lock that recognizes couriers or cleaners and allows customers to grant them access to their homes remotely. Amazon had also acquired wireless security camera startup Blink in December.
Macquarie affirmed its Outperform rating and price target of $1,750 per share, which is 14% above its current price.
Amazon was trading at $1,521.94 per share. It was up 28.4% for the year.
