Amazon Acquires Blink, Expands In Home Automation Space

Amazon.com, Inc. (NASDAQ:AMZN) has acquired Blink, a wireless security camera startup. The deal will give the online retail giant an increased share in the emerging and highly competitive connected home devices market.

Though, the terms of the deal have not been disclosed, Blink said that it would continue to operate as part of Amazon and sell the same products it already does.

Founded in 2014, Blink is a venture-capital backed startup that makes home security cameras. The company also produces low-cost video doorbells that allow homeowners to see a live feed of who is at their door by taking a look at their smartphones. These products are battery operated and totally wire-free, which make them relatively easy to set up and maintain compared with similar products available in the market.

Notably, Amazon has underperformed the industry it belongs to on a year-to-date basis. The company’s shares have gained only 55.8% compared with the industry’s growth of 60.8%.

Why the Acquisition?

The deal is in-line with the company’s aim to expand in the connected home devices market.

Amazon’s foray into homes was through Echo devices, released in Nov 2014. Since then, the company has been making efforts to maintain its supremacy in the home automation market. Creation of products meant to control home devices like home security, lighting and sprinklers, to name a few, has constantly added Amazon products to the homes of its consumers.

Recently, the e-commerce giant expanded its connected home lineup with Cloud Cam, a security camera that allows Amazon’s delivery workers enter homes to drop off packages when homeowners are away.

Given that Blink’s products also focus on the same, it will complement Amazon’s in the home automation space. More importantly, Blink's products are compatible with Amazon's Echo smart home lineup. Also, connected doorbells, another product of Blink, is becoming increasingly popular and will be a useful addition to Amazon’s lineup.

According to marketsandmarkets.com, the global home automation system market was valued at $39.93 billion in 2016 and is expected to witness a CAGR of 11.3% between 2017 and 2022.

Growing IoT market, cost reduction measures enabled by home automation systems, expanding product portfolios and an increasing importance of home monitoring from remote locations are expected to drive growth of the home automation system market.

The stupendous growth projection for the home automation market is a key catalyst for Amazon.

Other Acquisitions

So far this year, Amazon has made the second-highest number of acquisitions since 1998. Only last week, the company reportedly planned to acquire Sqrrl Data Inc., a cyber security startup based in Massachusetts. In October, the retailer acquired Body Labs, a startup that develops AI, computer vision and body-modeling based 3D body shapes and motion for various industries. In August, the company acquired leading natural and organic foods supermarket, Whole Foods Market (NASDAQ:WFM), Inc. for $13.7 billion.

Amazon is gradually choosing the buy option over build, which, along with the other positives, ensures revenue generation in the right way without wasting time in building its own infrastructure.

Zacks Rank and Stocks to Consider

Amazon has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Groupon Inc. (NASDAQ:GRPN) , PetMed Express, Inc. (NASDAQ:PETS) and SMART Global Holdings, Inc. (NASDAQ:SGH) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for Groupon, PetMed Express and SMART Global is projected at 7%, 10% and 15%, respectively.

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