Amazon(AMZN) closed at $181.26 on friday, down $65 from its October high of $246. What gives? Amazon recently released its updated Kindle device, the "Kindle Fire". Priced at an incredible $199, there are worries that the "Fire" will erode Amazon's already tight margins. There have also been some negative reviews on the device, as well as some complaints about a laggy touchscreen and buggy operating system.
With an estimated 6 million units to be sold in the 4th quarter, it is hard to think this can be anything but a good thing for Amazon irregardless of the issues. When you spend $199 to get a tablet, you need to lower your expectations. And if Amazon can get this device into enough hands, it can only help the companies margins down the line.
Well think back to Apple and Itunes. Why did Itunes become the #1 digital download site for music? Not because it was the favorite site for music lovers, but because they were forced to register and use Itunes to manage their library. Over time, they became accustomed to using Itunes to buy their music as well. Why? Because people are lazy. No need to go to another download site, pay to get the music, then get it back into Itunes so you can put it on your Ipod.
If your a frequent Amazon customer, you will realize the focus they are putting on content. If it's not amazon app store, where they are offering a free app download a day, It's amazon prime, where they are talking up their video streaming.
Bottom line, is I think we will look back at the "Kindle Fire" launch, as a catalyst for Amazon's becoming a top destination for all digital content related items. And when it does, the chatter will not be Amazons low margins anymore.
Looking at the chart, AMZN (Amazon.com) looks ready to retest 200 day moving average at $200.99. Will also be looking for it to retest its highs into earnings in late January.