Is Amazon.com, Inc. a Buy?

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Everyone wants to knock off the king.

Amazon (NASDAQ: AMZN) has changed retail, and that has given its rivals a blueprint for success -- the company has shown every other retailer exactly what it takes to dominate the market. But knowing and doing remain very different things.

The online giant's recipe is simple. Offer good prices and free two-day shipping, and sell just about everything. That sounds like a recipe that's easy enough to follow, but it requires an economy of scale that's so large that Walmart (NYSE: WMT) has become its only direct rival, while everyone else merely goes after niche audiences.

An Amazon Echo sits on a kitchen counter.
An Amazon Echo sits on a kitchen counter.

Echo/Alexa opens up a new sales channel for Amazon. Image source: Getty Images.

How is Amazon doing?

The online retailer is somewhat secretive when it comes to certain numbers. It does not report how many people pay for its Prime service, which offers unlimited two-day shipping, a video service, and other perks. It also does not report how many Kindles, Echos, and other Fire TV devices it sells.

Amazon does have to report sales, and those numbers are on a seemingly endless path upward. Net sales grew by 31% to $177.9 billion, compared to $136 billion in 2016. Net income rose to $3 billion, or $6.15 per diluted share, up from $2.4 billion or $4.90 per diluted share in the previous year.

"Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don't see positive surprises of this magnitude very often -- expect us to double down," said CEO Jeff Bezos in the earnings release.

What's next for Amazon?

Consider Prime a sort of moat against competition for the online leader. Walmart stopped charging for two-day shipping on eligible orders, and that did not even cause a ripple in Amazon's business. On the digital sales side, Walmart may grow, but so will Amazon, at the expense of smaller players and brick-and-mortar stores.

The real story for Amazon isn't the retail war, where it's already a winner. It's how Alexa-powered devices like the Echo have become staples in millions of homes. That gives the company an added sales channel, and the company's early success has kept every other company in the home-based digital assistant race fighting for a distant second.

"We've reached an important point where other companies and developers are accelerating adoption of Alexa," Bezos said. "There are now over 30,000 skills from outside developers, customers can control more than 4,000 smart home devices from 1,200 unique brands with Alexa, and we're seeing strong response to our new far-field voice kit for manufacturers."