Forget Amazon — Buy These Robotics Stocks Instead

Lou Basenese

Thursday, September 30, 2021

We don’t need to fantasize as we watch The Jetsons anymore…

Because Amazon (AMZN) is bringing real-life robots to our homes!

This week, the online retailing juggernaut unveiled its latest foray into the automation space with Astro, a $1,000 “home robot unlike any other,” according to the company.

I’ll say!

Astro sees, hears, and follows you around, making it a “freakish invasion of privacy,” as I told Fox Business Network’s Charles Payne yesterday (highlights here).

While it’s freaky to me and perhaps cool to others, by no means is Amazon’s release of a robot a reason to buy the stock. But it is a reason to push some chips in on the $50 billion global robotics and automation trend.

Let me explain why — and of course, provide specific ways to position yourself to profit.

Flex A Little...

First things first: Amazon is not a hardware company.

Case in point: It doesn’t even separate out device sales in its financial reporting, a clear indication that it’s inconsequential.

To be fair, when the company first unveiled its Alexa-powered devices in 2014, enthusiasm abounded over the revenue potential.

In fact, analysts predicted the new business segment would generate as much as $19 billion in annual revenue by this year.

The reality? It’s nearly a decade later, and the company is generating maybe $1 to $2 billion from devices per year, based on my research.

That might sound meaningful. But considering that Amazon reported total revenue of $386 billion last year, it’s irrelevant.

In other words, Amazon’s hardware sales don’t even account for 1% of its business.

New robot or not, the hardware segment is never going to move the needle for the company or the stock.

Heck, even Amazon’s official product launch page for Astro concedes that only “limited quantities” will be available.

So why bother?

Simple. Because it’s an opportunity for Amazon to flex its innovative prowess.

... Innovate More

There’s no denying that Amazon is on the forefront of tech development.

From cloud computing to logistics to online advertising to telehealth, the company’s legit business segments require constant innovation in terms of voice and edge computing, artificial intelligence, computer vision, and sensor technology, among other things.

Most people wouldn’t have a clue about these true breakthroughs, though, unless they enjoy nerding out like me and scrolling through patent filings.

That’s where the true purpose of the company’s hardware products come in:

They’re a way to showcase to the world the tech advancements that underpin its core businesses.

As such, new product launches make for good headlines, but terrible reasons to buy the stock.

In this case, however, the release does have significance in terms of signaling that now is prime-time to invest in the booming $50 billion global robotics and automation trend.

But instead of buying Amazon, which merely provides “token” exposure to the robotics trend, here are three smarter options that I recommend — 2 options for all readers, and a special third option for Pro readers:

  1. Pure-play companies that generate the majority of their revenue from the sale of robots that perform specific tasks. Generally, these companies specialize in the “brains” of a robot – what it does, how it reacts to situations, and how it interacts with humans. The investment thesis for pure-play robot companies is the easiest to understand… but the hardest to get right. Some companies will design robots that nobody wants; others will simply fail at executing their business plans. But those who succeed tend to do so on a big scale. Examples of such companies include iRobot (IRBT), Intuitive Surgical, Inc. (ISRG), ReWalk Robotics (RWLK), and AeroVironment (AVAV).
  2. Component firms that make the technologies (i.e., chips) that are the “senses” of robots, or the tools robots use to accomplish tasks. Most often, robotic components are an extension of a company’s existing business line. Examples of such companies include Ambarella, Inc. (AMBA), Trimble Navigation (TRMB), and Microchip Technology (MCHP).

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Ahead of the tape,
Lou Basenese
Lou Basenese

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