(Bloomberg) -- Amazon’s reported $1 billion acquisition of home security firm Ring is expected by analysts to streamline and augment Amazon’s long-term plans for delivery of products into customers’ homes. Analysts from Baird say eventually Prime members will be able to order groceries through their in-home Echo device, have it fulfilled at the local Whole Foods, and then have the delivery courier granted access inside their homes by Ring.
Loop Capital, Anthony Chukumba
- Rates AMZN buy, PT $1,600
- "We believe this deal — similar to last year’s introduction of the Amazon Key Home Kit smart lock — is intended to reduce the customer ‘pain point’ of package theft, as well as beef up the company’s smart home merchandise assortment"
- Given Amazon’s strong balance sheet and ample free cash flow, the company has demonstrated an increased willingness to make sizable acquisitions when necessary in areas management deems strategically important
- "We do not expect this deal to have a material impact on Amazon’s near-term financial results."
Baird, Colin Sebastian
- Rates AMZN outperform, PT $1,600
- "Amazon’s purchase of Ring makes sense, in our view, and also helps to equalize the automation push currently underway by Google Home and Nest"
- "As Amazon moves more aggressively into the grocery delivery space (Amazon Fresh, Prime Now and Whole Foods delivery), we believe smart security devices will be an important factor in driving user adoption"
- Over the long term, we see a scenario in which Prime members order groceries through a voice command to their Echo device, fulfilled at Amazon Fresh/Whole Foods, and unpacked in your house through access granted via a Ring device
Credit Suisse, Stephen Ju
- Rates AMZN outperform, PT $1,750
- "We believe the product/strategic rationale for the near to-medium term would be to integrate Ring.com’s products with Amazon Key to decrease friction on order delivery by allowing users to let couriers inside their homes"
- "The $1 billion acquisition price suggests a trailing 12 month revenue multiple in the vicinity of 5x if we assume an ASP of ~$200"
- "We do not expect this acquisition to meaningfully change our estimates in the near-term."
Stifel, Shlomo Rosenbaum
- AMZN covered by Scott Devitt, rated buy, PT $1,800
- "This is another step in the disruption of the legacy home security market by newer technology entrants, in our opinion."
- "As a partner with deep pockets and a major sales and distribution platform, Amazon could accelerate Ring’s product development and marketing strategy, increasing the pressure on existing players like ADT and ASCMA/Moni"
- "Moni recently partnered with Nest to provide outsourced alarm monitoring services for Nest products where there is customer demand for a monitored service - it will be interesting to see if Ring/Amazon eventually goes down a similar route"
BofAML, Nikolay Beliov
- Rates Alarm.com buy
- The 5% selloff in Alarm.com stock after the Amazon/Ring deal news is "a particularly attractive buying opportunity based on our recent deep dive into the do-it-yourself (DIY) market"
- "Our work on the DIY market indicates that ALRM is the gold standard in smart home security"
- "The noise around lower-cost DIY home security products will not have meaningful long-term impact on ALRM’s business"
- "The Internet giants (Amazon, Google, Apple) are approaching the market from a much broader perspective and lack the security focus"
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