Thursday, October 23, 2008

Christmas is Still on at Amazon

Everybody knows I'm very bullish about Amazon and though they have adjusted their guidance for the 4th quarter, to account for the uncertainty, they are still growing in this economy.

Here is what the analysts are saying:
  • Jeetil Patel - Deutsche Bank "We maintain BUY rating on shares of Amazon, as the fundamental growth (in metrics) remains solid, albeit affected by the strength in the US dollar and modestly by weak consumer spending. While FX headwinds and the current economic downturn have temporarily muted near-term growth and margin expansion, we expect unit growth in 2009 to power 19% operating profit dollar growth, which we think should lead to share price appreciation over the next 12-months." (Bold is mine)

  • Justin Post - Merrill Lynch "Three positives for long term shareholders: 1) strong customer growth in 3Q at 17%, 2) midpoint of 4Q guidance implies a still solid ~20% ex-currency rev. growth in 4Q even in the heart of the recession, and 3) unit growth in 3Q was steady at 30%. Amazon's long-term share growth thesis across categories is on track, in our view.  We do note that incremental margins in 4Q are expected at just 3.7% in our model, which is well below street long-term margin outlook (8-10%), so bears will argue Amazon is using lower margin sales to drive top-line. (Bold is mine)

  • Scott Devitt - Stifel  "Amazon reported 3Q08 revenue of $4.26 billion, an increase of 31%. Cash operating income was $231 million, up by 31%. Trailing twelve month free cash flow was $970 million, up by 21%. Amazon's domestic revenue growth rate was 29% and came in at 4x the industry. Amazon's international revenue growth rate was 33% or 28%, excluding currency. The company's quarter was solid in all respects and operating margin would have been better if not for the three capacity-driven domestic fulfillment center additions." (Bold is mine)
While Amazon management adjusted 4th quarter guidance down, it was due mostly to the effect of the stronger US dollar and less to the current consumer spending malaise. While you wouldn't want to go out on a limb and buy up a lot of Amazon stock right now, if you sell product online, you will still want to be selling on Amazon this 4th quarter. Christmas will run as scheduled over at "The River".



Just my 15%

12 comments:

Tony P. said...

Yeah, what Jeetil said!

"Amazon's domestic revenue growth rate was 29% and came in at 4x the industry."

Irony: ebay helped Amazon look *really* good here.

ebay's "boat anchor" metrics brought down that 'industry' figure, which propelled Amazon's number above the waterline.

Just color me vindictive. :)

Anonymous said...

I read your blog everyday. But Amazon lowered their numbers up to 1 BILLION dollars. You can be a cheerleader for Amazon all you want but lets look at the numbers and tell it like it is. I know you hate Ebay since your business failed. But Amazon is projecting a very bad Christmas.

Randy Smythe said...

Anonymous,

The consensus is roughly $500 million not a billion and most of that ($400 million) is the result of FX. So while Amazon will be affected they are still the place for ecommerce on the web this Christmas.

BTW, I do not hate eBay. I want them to change direction, there is a big difference between the two.

I own no stock in either eBay or Amazon and this blog is purely my opinion. I've looked at Amazon's numbers and their very conservative guidance for Q4 and believe they are still the place to sell this Christmas.

Anonymous said...

Randy: this is your blog and you have the right to write what ever you want. But if you would like to expand your blog and get new readers you have to stop writing only great things about Amazon and negative articles about Ebay.You have grown your blog with angry Ebay sellers. This will only take you so far. Good luck with your blog but you have lost 1 of your blog readers.

Randy Smythe said...

Anonymous, I am sorry to hear that. Amazon is not perfect but the issues I see with them are not as concerning to me as eBay's issues.

I'm not sure what you expect from the blog. I just write about what I see in the marketplace and what my personal experience is.

I will start writing critical posts about Amazon when I see they are making the wrong moves and conversely I will start writing positive posts about eBay when I see they are making positive changes.

I hope you will keep reading.

paul said...

Hey anonymous there are other blogs that are not so negative about Ebay that I read. Try onlyebay.com He has not written much lately but when he did it was fair and balance reporting. Randy is the only one that I kanow that writes about Amazon. Good luck

Randy Smythe said...

Paul,

OnlyeBay does a great job on the positive side of eBay but he doesn't post much anymore.

Remember, I'm not really an investment blog. My perspective is that of an online sellers, so that will color my opinions a little.

Anonymous, I am always open to discussion so why not use My Blog Utopia to give me your opinion of Amazon.

ms.pat said...

I think your blog is great Randy. Its not our fault if the majority of vocal sellers are frustrated with Ebay...I'd say that's Ebay's fault.

Chris said...

Paul I also have started to read other blogs. Randy was one of the best blogs to read but all he does now is bash Ebay all day long and tell everyone that Amazon can do no wrong. If you post your e-mail address I will send you some blogs that I have started to read.

Randy Smythe said...

Chris,

Just post the other blogs here in the comment section. I'm always interested in new perspectives.

I would prefer you continue to read my blog and tell me specifically where I'm wrong, so we can have a debate.

Tony P. said...

Gee, I hope my cheerful post didn't produce all this Randy-bashing. :)

Like da man said, this ain't an investment blog. At least, not in the strict sense of "stock" blogs - more about ecommerce seller "investment".

All I'm interested in is/was Amazon's "transactional" business. I do want them to make a profit (I'm long Amazon), but that isn't my focus on their recent numbers.

If their Operating Expenses had been 110% of revenue, they'd have been in a real pickle. I'd have felt bad (really!), but brushed right by that number to see how much BUSINESS they had done.

Their customer base grew, their revenue grew and they predicted growth for 4Q08. That's all I needed to see.

I don't give a flying-rats-ass about EPS, data crunchin' the metrics, Jim (Bear Sterns is AOK; subprime is AOK) Cramer. I follow Mr. Buffett's advice: invest in the company, not in the numbers.

Amazon grows with the economy - when (if?) the economy recovers, they will grow.

Ebay? ????????????????

permacrisis said...

The bashers no more hate ebay than a libertarian hates his country. It's that damn government...

They adore the original idea of ebay, before favoritism and dishonesty were introduced. In many businesses those traits are necessary, in ebay's model they proved toxic.

Actual ebay bashers are the ones who never even gave ebay a try, dismissing sellers as trailer trash. The ones who have sold here only to have our dreams perverted and subsumed have the right to criticize.

Small sellers didn't build ebay so much as Democracy did. A seller lived or died depending solely on their value proposition.

Those of us who used the platform as intended really believed that the days of being pushed around by big business were over-- and preached ebay to anyone who would try it.

How stupid we were, to think that what happened in other spaces wouldn't happen here.

Don't peg us as bashers, anon chris & paul. we introduced our girl to ebay-

and Ebay Stole Our Girl.