Novice Investing - Amazing Quarter for Amazon

Date: Monday 15th 2010f March 2010 07:42:58 AM

Amazing Quarter for Amazon - 01/31/2010

By: Hari Wibowo

		Amazon.com, Inc. 1200 12th Avenue South Suite 1200 Seattle, WA 98144-2734 United States

Amazon.com, Inc. (AMZN) chugged along in its latest quarterly performance. Revenue jumped to $ 9.52 Billion, an increase of 42% compared to the prior year. You got that right. The 42% revenue growth is not a misprint. Operating income increased 75% to $ 476 Million in the quarter. Somewhere along the earning statement, surprise surprise, Amazon also announced that it will have a new shares buyback program worth $ 2 Billion. This replaces the $ 1 Billion share buyback authorized in 2008.

Year 2009 is certainly a banner year for Amazon. Revenue increased 28%, while net profit increased 40% to $ 902 Million. This while maintaining a gross margin of 22.5%, virtually unchanged from 2008. Free cash flow, the number that Amazon is watching for, rose 114% to $ 2.92 Billion in all of 2009. Guidance for 2010 remains strong, with revenue growth of at least 30%.

Competition is heating up with Apple, announcing its iPad which competes directly with Amazon's Kindle. A lot of analysts have made tables of comparisons between iPad and Kindle. As the first mover in the market, Kindle's reputation is well deserved. Estimates for Kindle to have been sold between 2 to 3 Million units thus far. We have identified one review that gives a tie for both Kindle and iPad, based on 12 criteria from device price, ease of use to content portability and battery life. Books was Amazon's largest revenue driver, followed by electronics. By offering Kindle and selling e-book, Amazon generated sales on both front. We might expect Apple's iPad to cut into Kindle's leadership in this area. There will certainly be tag of war between the two technology giants, Amazon and Apple. Kindle offers an attractive ebook price for consumers, lower entry price for new users while iPad gives higher royalty fee to publishers, but with higher device cost for entry users.

With current market capitalization of $ 54.30 Billion and $ 902 Million in net profit, Amazon shares is not cheap. Throw in net cash of $ 6 Billion, $ 2 Billion shares buyback and 30% expected revenue growth, Amazon still doesn't look cheap. But again, that is what most investors thought when Amazon.com reached its nadir at $ 10 per share back in 2002, $ 30 per share after it reaches breakeven and $ 50 per share after Amazon announced its first ever yearly profit. Short term, investors seem to agree with us. On the day after earning such a stellar earning, Amazon.com shares fell $ 5 per share (3.8%) from its high of the day.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Amazon.com Inc. (AMZN) or any other securities.

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