Macquarie Discusses Amazon's 'Uncertain' And 'Unclear' Hardware Strategy

• Shares of Amazon.com, Inc. AMZN have gained more than 60 percent year-to-date, as investors are finding confidence in the company's sales and strategies.
• Macquarie Research analyst Ben Schachter commented in a note on Friday that Amazon's hardware strategy is "unclear."
• Schachter's comments follow Amazon's announcement of a $50 tablet.

Ben Schachter of Macquarie Research doesn't "fully understand" Amazon's hardware strategy – and he isn't the only one.

In a report published Friday, Schachter stated that he sees a "lot of uncertainty" in Amazon's hardware strategy, specifically how it can tie in with Prime, home automation, app stores, and voice while also competing against other table manufacturers.

Schachter added that he is even "surprised" at how little Amazon Prime has been tied into the company's hardware efforts as there aren't many Prime members benefits related to hardware such as early delivery, more exclusive content, and lower pricing.

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The analyst said Amazon is "still very much" in the hardware business and recent layoffs at the company's hardware-focused Lab 126 doesn't exactly tie in with the recent announcement of a $50 tablet.

Schachter further noted that it is "unclear" how many tablets Amazon can sell and recent proprietary checks indicated a low-mid single-digit million selling rate, despite the attractive price target. The analyst did note that Amazon's hardware devices do have "some notable features" such as voice controls and content, but yet again, he pointed out that overall hardware strategy "remains confusing."

Finally, Schachter stated that Amazon's efforts in voice control and home automation is "compelling," the company is facing growing competition from other tech giants and the "important" space will likely be "hyper-competitive" for the foreseeable future.

Bottom line, while sales of tablets may be uncertain in the near-term, the analyst suggested that Amazon will be a major player in the virtual/augmented reality space over the coming years as it is "likely" Amazon is "working on something."

Shares remain Outperform rated with an unchanged $660 price target.