Amazon stock analysis: 5 reasons to buy and hold in 2011 (AMZN)

Since the start of 2011, shares in Amazon.com, Inc. (NASDAQ:AMZN) have fallen nearly 3 percent, but the company’s prospects still look strong thanks to a growing product pipeline. Here are five reasons to consider adding Amazon stock to your portfolio today:

1) Welcome to the Cloud Drive. Amazon has a history of forging into new tech niches long before they’re popular. The best example of this is Amazon Web Services (AWS): Amazon’s paid cloud computing service wherein other companies pay Amazon for server space and computing infrastructure. AWS has attracted some impressive clients since it launched in 2006 including Nasdaq (NASDAQ:NDAQ) and The New York Times Co. (NYSE:NYT). Now, Amazon’s looking to take its cloud services to the common man. This week the company launched Amazon Cloud Drive. With Cloud Drive, anyone who wants it can get 5 GB of online storage for free. They can then use that server space to store music, videos and files online and access them from Web-enabled devices anywhere. If users end up needing more than 5 GB of storage, they’ll have to open up their wallets to Amazon.

2) It’s “Appstore” not “App Store”. Much to the chagrin of Google Inc. (NASDAQ:GOOG), Amazon launched its Android Appstore last week. Now, consumers can un-tether themselves from Google’s official Android Market, and download free and paid apps directly from an online retailer they’re already familiar with. Amazon stands to get a 30 percent cut of every paid app they sell. For the record, Google’s not the only one upset about the launch of Amazon’s Appstore. Apple Inc. (NASDAQ:AAPL), which has the name “App Store” trademarked, sued Amazon over its use of the word “Appstore.” Apparently, there are times when branding trumps the threat of litigation.

3) One nation under Kindle. The success of Amazon’s e-reader, the Kindle, has been remarkable. Amazon hasn’t released exact sales figures on the device, but it already sells more e-books than it does traditional paperbacks. “Since the start of the year, Amazon has sold 115 Kindle books for every 100 paperbacks,” PCWorld reported in January. The good times are rolling. In February, AT&T Inc. (NYSE:ATT) announced it would start carrying Kindles, and now there’s speculation that a new Kindle in the works will run on Google’s open-source Android operating system. That would have the power to transform the Kindle from an e-reader into a full-blown tablet computer that just might compete with Apple’s iPad.

4) For your fulfillment. Amazon’s shares took a tumble after the company reported weak revenue growth in its Q4 earnings report on Jan. 28. The numbers weren’t all that surprising to analysts, though, as the quarter’s traditionally weak for the online retailer, and Amazon’s in the process of expanding its fulfillment centers. “1Q margins are likely to disappoint but reflect the higher spend on fulfillment centers/IT needed to extend AMZN’s above-industry growth well into the future,” Youssef H. Squali, an analyst at Jefferies & Co., wrote in a note to clients. “We recommend purchase of AMZN especially on any dip.” Bigger fulfillment centers means better margins moving ahead, and – after the costs are absorbed – that should boost the company’s bottom line.

5) Growth in the People’s Republic. Amazon’s quietly been building its brand in China since acquiring the Chinese online bookseller Joyo.com in 2004. In 2007, Amazon changed the site’s name to Amazon.cn, and it’s now the 74th most-visited site in China, according to Alexa.com. That puts it just one slot behind one of its main competitors: the online bookseller and retailer E-Commerce China Dangdang Inc. (NYSE:DANG), which recently IPO’d in the U.S. and operates Dangdang.com. Even if Amazon doesn’t ultimately overtake DangDang.com, there’s more than enough e-commerce growth in China to grow Amazon’s coffers for years to come.

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How to invest in ISIS

The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies.

Online mobile shopping could command as much as 12 percent of total global e-commerce by 2015, according to a report ABI Research. It’s a sign of just how comfortable consumers are getting using their phones to make purchases. The next logical step is to use mobile phones as payment mechanisms in stores, restaurants and small businesses – doing away with plastic once and for all.

The transition from credit cards to phone swiping could completely change the way with interact with businesses. No longer would we use a simple plastic card with a magnetic strip on the back, we’d be paying with a computer that could track purchases, offer discounts, tick off rewards points and offer incentives to come back.

ISIS is leading the charge into the pay-by-phone marketplace through a partnership with AT&T, Inc. (NYSE:ATT), Verizon Communications Inc. (NYSE:VZ) and T-Mobile USA. The national mobile commerce network will use near-field communication (NFC) technology to allow phones to wirelessly communicate with checkout terminals.

The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies. Here are some tickers to consider if you’d like to invest in ISIS and NFC:

Discover Financial Services (NYSE:DFS). Payments made through the ISIS network will be processed by Discover. The Discover network is currently accepted at more than seven million merchant locations nationwide. DFS will, no doubt, get a percentage of all the sales the company processes.

Barclays, PLC (NYSE:BCS) Barclaycard US is expected to be the first issuer on the ISIS network thanks to the company’s experience processing NFC payments using standard credit cards. Eventually the ISIS network will be expanded to other banks.

While it’s unclear exactly how AT&T, Verizon and T-Mobile will profit off ISIS, I suspect they’ll also receive a cut of the payments processed over the network. They’ll likely ramp up efforts to partner with retailers to offer expanded services, too – things like rewards points, customer tracking and coupons.

It’s important to remember, though, that ISIS is just one of the many networks and companies working to dominate the pay-by-phone market. Visa, Inc. (NYSE:V), MasterCard, Inc. (NYSE:MA), eBay Inc.’s PayPal (NASDAQ:EBAY), Google Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are just a few of the heavyweights with skin in the game. It’ll be interesting to see which companies come out on top.

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