The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First. 

Amazon Stock Predictions

Summary:

• Amazon has been hiring employees in Singapore since last year.
• After a reported postponement last May, Amazon is rumored to be finally launching its services this week in Singapore. The Lion City also hosts SouthEast Asia’s biggest e-commerce operator, Lazada
• Alibaba-owned Lazada is the undisputed king of e-commerce retail/wholesale in the Southeast asia region.
• On the other hand, Amazon’s generous freebies and discounts for Prime subscribers might help it compete better against Lazada.
• AMZN has positive one-year algorithmic forecast for AMZN. Near and medium-term forecasts are negative though.

Amazon (AMZN) was hiring employees in Singapore since last year. Amazon also reportedly signed a lease for a 100,000 sq. ft. at Singapore’s Mapletree Logistics Hub last November 2016. The Mapletree lease was obviously a future fulfillment center for Amazon’s first online marketplace for SouthEast Asia.

After a reported postponement in May, Tech Crunch reported that Amazon will finally launch this week its online store, Amazon Prime, and Amazon Prime Now services in Singapore. It will be the first foray of Amazon in to SouthEast Asia. Amazon chosed its first store well, Singapore is also the headquarters of Alibaba’s (BABA) Lazada subsidiary. Slowing growth in North America and Europe is likely why Amazon now wants to challenge Lazada in Southeast Asia.

(Source: Motek Moyen/Amazon/Lazada)

Freebies and Discounts From Prime Could Help Amazon Catch Up With Lazada

I am not overly optimistic about Amazon’s chances in Singapore and SouthEast Asia. Lazada is the long-time leader in SouthEast Asia e-commerce. That’s why Alibaba bought it last year. Lazada’s distribution and vendor partner network is already deeply ingrained among Southeast Asians.

The only thing I could foresee that would help Amazon catch up with Lazada is the many freebies and discounts offered to Prime subscribers. Singaporeans, Thailanders, Indonesians, Malaysians, Vietnamese, and Filipinos will likely sign-up for an Amazon Prime account just to get the same freebies and discounts that American/European currently enjoys.

(Source: Amazon)

Lazada’s most-compelling features is its free delivery, free return, and Cash-on-Delivery payment scheme. However, it certainly doesn’t offer free unlimited movie/video streaming, photo storage, and music streaming. The free Audible Channels and Prime Reading bonuses are already compelling reasons for any Asian to sign-up for an Amazon Prime account.

Amazon’s massive success in America is largely due to its estimated 85 million-strong Prime subscribers. I think Amazon will have a flourishing business in Southeast Asia if it could also recruit 10 or 20 million Southeast Asians to sign-up for $99/year Prime subscriptions.

As we can see in the chart below, Prime Members spend more money on Amazon than those who are non-members.

Source Statista

Going forward, I expect Southeast Asia to attract at least 20 million Prime members for Amazon.

20 million x $ 1,700 = $34 billion

If all things work out well, Prime Members could help Southeast Asia contribute $34 billion/year in annual sales to Amazon.

Why SouthEast Asia Is Important To Amazon

Getting involved in Southeast Asia’s growing e-commerce industry could help Amazon catch up with Alibaba’s big lead in Gross Merchandise Value. It was a blunder of Jeff Bezos that he ignored Southeast Asia for a long time.  His early mistake has allowed Lazada to become the runaway leader of the SouthEast Asia e-commerce industry. Bezos concentrated too much in India.

I believe the average individual purchasing power of SouthEast Asians is really higher than that of citizens of India. E-commerce is really dictated by people’s average annual income. Even the Philippines has a higher per capita income than India. It was judicious of Lazada to launch an e-commerce portal in Southeast Asia before Amazon took notice of this region of 600 million people.

Amazon failed in China. Amazon is also still struggling against FlipKart in India. Southeast Asia therefore might be Amazon’s next ticket to ride the booming e-commerce trade in the Asian region.

My Takeaway

Southeast Asia is important to any e-commerce or online marketplace operators like Alibaba and Amazon. It’s bad that Amazon allowed Alibaba to take control of Lazada. Amazon now has an uphill battle against Lazada in Southeast Asia. Nevertheless, opening its services in Singapore is still a small tailwind for AMZN.

Bezos has finally acknowledged that Amazon has long-term opportunities in this side of the world. Like I said earlier, Amazon is missing a lot by ignoring the purchasing power of 600 million Southeast Asians. Amazon’s future growth will largely be dictated on how smart it could expand beyond North America and Europe.

I Know First has negative short and medium-term algorithmic forecasts for AMZN. You can wait for a cheaper entry point for AMZN. In my book, Amazon is still a good addition to your long-term portfolio. AMZN has a positive long-term or one-year algorithmic forecast from I Know First.

Past I Know First Forecast Success with AMZN

I Know First has made accurate predictions on AMZN in the past, such as its bullish article published on December 20, 2016. In the article, Amazon Prime membership is on the rise and the use of drone for home delivery is generating interest. Since the article’s release, AMZN shares have increased by 37.44% in line with the I Know First algorithm’s forecast. See chart below.

(Source: Google Finance: AMZN)

This bullish forecast for AMZN was sent to I Know First subscribers on December 20, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.