Amazon Has Out-of-This-World Ambitions. Can It Lift the Stock?
Key Points
Satellite internet is the next big business opportunity that Amazon is pursuing.
The company has encountered snags but will look to launch its service later this year.
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Amazon (NASDAQ: AMZN) has never been afraid to bet big. The company became the world's largest e-commerce company by investing in fulfillment centers and logistics. Meanwhile, it's never sat still in its core business, continuing to invest in robotics, automation, and drones to try to widen its lead.
It also created the entire cloud computing industry with the introduction of Amazon Web Services (AWS). Investors originally balked at the spending Amazon invested in scaling AWS, but today it is its most profitable and fastest-growing business. Meanwhile, the cloud industry as a whole is helping fuel the growth in artificial intelligence (AI), and Amazon has become one of the biggest players.
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Shooting for the stars
Amazon's ambitions extend beyond e-commerce and cloud computing, and toward the stars. One of the least-discussed potential growth drivers that the company has in front of it is Amazon Leo. Formerly called Project Kuiper, Amazon Leo is the company's low-earth orbit (LEO) satellite constellation that it is building to provide high-speed broadband internet worldwide. Amazon currently has more than 240 satellites in orbit, with plans to eventually have 3,200 in orbit in the coming years.
The company has been hampered by having to rely on launches from third parties, including from its chief rival in the space, SpaceX, which owns the competing Starlink service. However, Amazon is set to turn to Blue Origin, owned by Amazon founder Jeff Bezos, to take on the bulk of Leo satellite launches starting in 2027. The company also says it has committed billions of dollars to secure launch commitments through early 2029.
Amazon is also reportedly in discussions to acquire Globalstar, which would give it important spectrum licenses. The company holds licenses for L-band and S-band spectrum that would allow Amazon to connect its internet service directly to smartphones without requiring any additional special equipment. The one roadblock to the deal is Apple, which owns a 20% stake in Globalstar and has the rights for 85% of its network capacity for satellite-based texting.
Another growth driver
While Amazon Leo isn't moving at full speed yet, it is progressing, and a deal to acquire Globalstar could provide the fuel to make this business a meaningful contributor in the coming years. Amazon plans to launch the internet service in mid-2026, and it already has commitments to provide service to companies like JetBlue and Delta, as well as governments.
At the same time, it promises to offer faster speeds than Starlink at lower prices. Leo will also allow enterprise and government customers to seamlessly move data back and forth from AWS through its network.
Given Amazon's lackluster stock performance in recent years, another revenue growth driver could be just what the stock needs for it to blast higher from here.
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Geoffrey Seiler has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Apple and is short shares of Apple. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
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