Amazon's shares are hot, but success is here to stay
Filed under: Company News, Technology, Investing, Earnings, Google , Apple, Stock Picks, Amazon.com, Inc.
For more than a decade, some smart, successful investors have been saying that Amazon.com (AMZN) wouldn't succeed, because its business plan was flawed. Meanwhile, the company built its reputation as an online bookseller, added more products, and boosted sales.During that time, Amazon's stock was volatile, racing higher through price targets set by the likes of former Wall Street analyst Henry Blodget, and then reeling through declines of more than 50 percent as investors and analysts doubted its ability to grow. Last week, the stock reached a record-high after reporting earnings. Has Amazon finally convinced naysayers it's here to stay?
More analysts and investors this week are saying yes. Amazon increased product choices while keeping inventory low and without losing its focus on superior customer service. A bonus is Amazon's ideological leader, CEO Jeff Bezos, who, like Apple (AAPL) CEO Steve Jobs and Google (GOOG) CEO Eric Schmidt, serves as a chief motivator.
Amazon CFO Thomas Szkutak said worldwide sales were up 28 percent over last year, to $5.45 billion, for the most recent quarter. It spent 2.6 percent of its revenue on marketing itself as a one-stop online shop. Its inexpensive shipping costs have led to customers to expect cheap or free shipping, which eliminates a main hurdle for getting consumers to shop online.
James Mitchell, a Goldman Sachs analyst, asked Szkutak during Amazon's earnings call last week about North American sales, up 23 percent to $2.84 billion from a year ago. Szkutak said customers buying more in each order boosted sales in the most recent quarter. He also pointed out that Amazon has $4 billion in cash, which gives it a solid foundation and shows that it's building muscle.
"Amazon weathered the economic downturn better than traditional retailers," said Benchmark analyst Fred Moran. "As those traditional retailers struggled, Amazon gained share." Moran last week upgraded Amazon shares to buy from hold, and set a 12-month price target of $143 a share. "In the midst of a tough retail environment, and while consumers have been challenged, Amazon has grown, and now that we're seeing some consumer relief, Amazon continues becoming more dominant," Moran says.
For Amazon, success has led to more success. The larger the company grows, the more customers it attracts. There were many doubters, but it has built the default online mall. Amazon's not merely succeeding -- it has proved it's here to stay.
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Reader Comments (Page 1 of 1)
10-28-2009 @ 6:33PM
TONY said...
and you people want to know why the country is failing? AND JOBS ARE GONE?.. and small business is closing their doors by huge amounts?.. AMAZON .com sells everything they have no clue about at so low a price it makes WALMART look like a thief,. and this is taking down the country. The first problem was able to buy tires and coldcut deli meats in the same aisle at WHOESALE clubs. No small bsuiness can compete and make profit out of a storefront, pay for employees and healthcare and vacation,, ARE WE INSANE? The internet commerce, paypal, craigslist and ebay has made AMERICA one huge yardsale devaluing all goods and services to be more worthless than ever and this christmas will be another record online... SHAME on the harvard economists for not seeing this coming,, next will be malls and their extinction.. just like the newspapers are dying and no one can figure this out? wow -- are we really that ignorant? everyone just knows how to keystroke to sit on their ass and purchase goods & services at less than cost,NICE!! take internet price advertising off the internet, and make it a level playing field for everyone and the economy will return back to REGAN era instantly! Small business has no chance of survival. I know, i visit everytype of industry in existance in this country for over 25 years as a machine repair specialist and I talk to many a small business to large business! this is FACT@
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10-30-2009 @ 2:15PM
Ed McKee said...
Tony would have probably been the same person shouting as farmers started using tools to be more efficient that the economy would be gone with small farmers getting squeezed out. He probably would have been the one lamenting the introduction of the assembly line as it severely decreased the need of more workers. What he doesn't seem to understand is that every improvement in the economy in which workers are displaced a new area rises to fill the void with the abundance of labor resources, making the economy better as a whole.
As for Amazon. I think they have a solid business model and will continue to grow, but at their current valuation, its way to expensive. It's current P/E ratio is reminiscent of the dot com era, and its stock is going to have to come back to reality for more sustainable growth.
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10-30-2009 @ 4:22PM
tony said...
ED:
I deal with high tech color high volume scanners, networks, and service to every business model in this country including fortune 500, so your wrong about the farmers crack.. You are wrong because small business creates jobs, and when you cant profit from something because of bad business models like amazon, then no one will employ anyone!! Eveyone is on their defensive for being $1/10th of 1% percent higher than what they saw it online for!!! volume business without profit leads to business erosion! How can you pay bills?
This is why your seeing our economy erode and its going to get far worse my friend. Staples was undercut by 50% on a simple $99 dollar item today, but instead of purchasing on amazon, i sucked it up and bought it from staples so the profit could pay for some highschool clerk behind the counter working partime after school.
Your business model of stocks and finaces is fantasy land. The real people working earning a living is what makes a stock valuable!!
I support high tech goods and services ED. I talk to people everyday in business, but profit is dwindling across America. and that pays the bills!! Not huge 1 amazon automated building that shipps out $ 5 billion in goods to make 1%.. the internet will kill the country business model and it will never rebound. EVERYONES an internet expert and knows what cost is upsetting our distribution channels. Our new generation of kids are trained to search for the lowest price while the state tax has evaporated into thin air.
Look around ED. companies are closing in staggering amounts. i HAVE 25 years under my belt with all types of accounts in differnet industries, and they all cannot be wrong!! internet commerce, amazon and ebay are the ruination of AMERICA....everyone says the same ole thing.. next time you walk into a business, ask him /her is it good to have prices advertised on the internet? is it good for your business?
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