3 Reasons Why the Eero Buyout Will Lift Amazon Stock

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

As an e-commerce pioneer and the ultimate technology disruptor, it doesn't take much to find positive coverage on Amazon (NASDAQ: AMZN ). But with CEO Jeff Bezos' recent salacious scandals , Amazon stock found itself in an awkward situation. It needed something to drive the narrative in a positive direction, and it got just that.

Earlier this week, AMZN announced that it will acquire Eero , an internet-router firm that specializes in home WiFi connectivity. Using a mesh network that essentially covered one's residence with WiFi signals, Eero claimed to close any "dead spots." For the most part, the upstart organization delivered on its lofty promises.

Sensing the longer-term opportunity, Amazon pulled the trigger. The acquisition makes sense on so many levels. Internally, it provides AMZN stock with additional revenue channels while further bolstering its smart-home ambitions. Externally, it follows industry trends, which have seen rivals like Alphabet (NASDAQ: GOOG , NASDAQ: GOOGL ) and Facebook (NASDAQ: FB ) expand into new markets.

Although the announcement didn't really move the needle for Amazon stock, it did send waves to the competition. Alphabet shares were limited on Monday's session, while NetGear (NASDAQ: NTGR ) slipped badly during extended trading.

Still, once AMZN stock works its way out of its rangebound pattern, the Eero buyout should prove invaluable.

Eero Adds Versatility for Amazon Stock

Before we discuss anything else, we should acknowledge Eero as a standalone product. Featuring an aesthetically pleasing curved chassis, and minimalist branding, the Eero router fits seamlessly throughout the home. While aesthetics aren't the most important factor in a smart-home system, it can potentially make or break the decision-making process.

As such, the Eero also aligns perfectly with Amazon's ultimate end game. Over the years, the e-commerce giant has shifted from facilitating merchandise sales to developing their own consumer goods. Thanks to its unassuming posture, Amazon will have an easier time convincing people to incorporate the routers into their homes.

Better yet, the Eero represents an effective, out-of-the-box competitor to a similar product, the Google Wifi. Both systems feature whole-house coverage, easy setup and strong security measures. With strategic placements, either unit will effectively fix most coverage gaps. In addition, they help prevent lagging issues with content streaming.

The most obvious difference is the pricing . Here, Eero comes out at $100 more than the Google Wifi. However, Eero incorporates receptacle-mounted beacons, which facilitate greater coverage-expansion possibilities. As a result, you can "grow" with this system, providing consumer versatility that could boost Amazon stock in the long term.

AMZN Stock Is a Comprehensive Smart-Home Investment

Obviously, the strongest motivator for the Eero buyout was comprehensiveness. With the internet router under its belt, AMZN stock now offers a cohesive exposure to the burgeoning smart-home industry.

Amazon jumped into the sector with its Echo smart speaker , which it released in conjunction with the Alexa app. Often marketed in advertisements and cameos, the digital personal assistant Alexa has become a mainstay in popular culture. Now, AMZN has a framework to support its lofty ambitions.

After all, if we've learned anything from Amazon's prior acquisitions, it's not satisfied controlling a component of an industry. Rather, it wants to dominate the entire supply chain. Moving forward, we're going to see multiple Alexa-powered devices. Even products as seemingly ridiculous as smart microwaves will find greater practicality through the broader Eero coverage.

It's important to not overlook how valuable a supporting platform is to the flagship product. For instance, Apple (NASDAQ: AAPL ) failed to leverage its connectivity advantage when they announced a HomeKit system without a smart-speaker product. As I mentioned above, Amazon released both the front-end product (Echo) and the supporting cast (Alexa) at the same time.

Therefore, it's no surprise that in terms of the smart-speaker battle, Amazon stock comes out on top. On the other hand, Apple barely registers on the radar.

AMZN to Suffocate the Competition

One of the reasons why investors love Amazon stock is that the underlying company loves disrupting established norms. But even more so, they go about this business in the most ruthless manner possible.

For example, the company's Whole Foods Market acquisition wasn't just about tip-toeing into the disparate grocery sector. With its Amazon Go venture, a next-generation grocery store that features minimal human interaction, the company signaled its true intentions: AMZN wanted to impart a radical paradigm shift.

It now has the same opportunity with the smart home. Previously with Echo and Alexa, Amazon controlled only a component of the connected home. But with Eero, it levers both the individual gears as well as the entire gearbox.

It's no wonder why NetGear shares reacted so violently. When you're in Amazon's crosshairs, you're not just worried about competing products. Instead, you're left wondering if the floor underneath you will give way.

In most cases, that's exactly what's happening. AMZN stock is the market's equivalent to Bill Belichick. Good, bad or ugly, the company finds a way to win, and consistently. Ultimately, the Eero acquisition is just another case study of the Amazon way.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

More From InvestorPlace

Compare Brokers

The post 3 Reasons Why the Eero Buyout Will Lift Amazon Stock appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.