For most people, Amazon (AMZN) is the go-to site for almost anything they need. The company caters to almost everyone and most US Amazon clients would consider it the king of digital commerce, surpassing other ecommerce giants like eBay (EBAY) .
AMZN has not been looking too good financially though, as the company's CEO and chairman, Jeff Bezos, conducted the second quarter Q2 conference call, and disappointed equity analysts and investors alike. According to Bloomberg, AMZN's stock price followed suit, as it sank by approximately 9.7% in after hours trading.
Furthermore, analysts have been quick to reduce their opinion of AMZN stock, as according to Reuters, the number of analysts who maintained a "hold" rating has increased from 10 to 16 in the past month, while those with a "buy" rank decreased from 34 to 29 as they downgraded to "hold".
New Business on the Horizon?
Despite these woes, August 13 th marked the date AMZN decided to unveil its competitor with eBay's PayPal and Square in the payments market, a very lucrative division that is actually the main driver for eBay at this point in time. Card-swiping devices or card readers appears to be Amazon's next venture, along with its heavily debated delivery via drones.
AMZN hopes to capture the attention of small businesses by unveiling its own $10 credit-card reader and mobile application, which will be available on Amazon Appstore, Apple App Store ( AAPL ) and Google Play ( GOOG ), that can make direct transactions. It will be competing with PayPal and Square by charging business cheaper fees for the service which is called 'Local Register'.
As per United Press International, the transaction rate is to be 1.75% for business who register prior to October 1 st for all transactions that take place until January 1 st 2016. After that period of time, AMZN will be charging 2.50% as a flat rate, which is still cheaper than Square's 2.75% and PayPal's 2.70%.
This foray into the payments market could be huge for AMZN, as some predict that the mobile payments market could be close to three quarters of a trillion dollars in transactions by 2017. Should Amazon get even a slice of this market, or manage to steal share from eBay and others, it could be a great new source of recurring revenue for the e-commerce giant.
Still, the short term isn't too pretty for the company as AMZN currently has a Zacks Rank #4 (Sell), and it is likely that we will see a pullback or some sort of correction in the near future. Estimates have universally been revised lower in the past two months, while the EPS projection for the full year has cratered from $1.19/share 30 days ago to just 23 cents a share today.
However, long term investors may want to consider holding on to the stock, as there is still plenty of room for growth despite the company's earnings miss. This is especially true if AMZN can break into mobile payments successfully, and steal share in this rapidly growing market. Still, for those looking at the long-haul, there are probably better entry points and patience is a good idea, particularly if AMZN maintains its low Zacks Rank.