By L.C. Jacobs: Subscribe to L.C.'s RSS feed
October 3, 2011 10:13 AM EDT
Amazon's (AMZN) new Kindle Fire tablet, like the prospective launch of Apple's (AAPL) iPhone 5 later this month, has created a buzz around Amazon's stock, and it's worth a review.
Look for Amazon's revenue to surge 40-45 percent in 2011 to $46.8 billion, after a similar 40 percent gargantuan gain in 2010, largely driven by market share gains, international expansion, and equally significant, new hardware products, including the Kindle Fire tablet.
Meanwhile, margins in 2011 will decrease, due to competitive pressures, offset partially by third-party sales.
To be sure, the new Kindle Fire tablet, priced at a bargain-basement $199, will not displace the Apple's iPad, but it will lay the groundwork for a more-sophisticated tablet device. For now, Kindle Fire's major selling point will continue to be content, with the company continuing to derive a healthy revenue stream from the product's staple ebooks -- Amazon has millions of ebooks. The device will also likely be streaming video and music capable, able to receive apps, and contain a Web browser.
Amazon is calculating that its $199 Kinder Fire will offer enough of a content experience to lure potential iPad buyers who are not thrilled about plunking down $499 for a tablet device.
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Amazon.com: An Online Retail Gem
Outside of Kindle Fire, Amazon's unique business model continues to impress investors. The online bookstore that's forced the closure of many brick-and-mortar bookstores, Amazon has wowed analysts with its successful expansion in to electronics, movies, music, games, toys, apparel, and shoes, among other categories.
What's more, Amazon has an enviable long-term plan, investing in Amazon Prime, Kindle/Kindle Fire and digital content.
A strong balance sheet, long-term customer relationships, and online business acumen practically say "back up the truck" from an investment standpoint, regarding AMZN.
The Thomson Reuters First Call FY2011/FY2012 EPS estimates for AMZN are $2.07 and $3.32, and each EPS estimate looks about 10 percent low, according to my analysis.
Amazon's shares traded Monday morning up $2.77 to $219.00.
Technical Stats
Technically, Amazon's shares have been in an uptrend in 2011, but with higher-than-normal volatility. AMZN pushed higher from $160 in the winter to $220 in August, before plunging to about $175. The stock has since recovered to about $219. Extended dips below the key, 50-day moving average have been the recent norm with AMZN, hence patience is required: the stock is not investors who panic at the sight of a 10 percent dip. The stock should trade above $250 by the end of 2011 and above $300 by mid-2012.
Stock Category: AMZN is ideal for investors who want a growth company with plenty of upside potential. Don't expect a calm ride up to higher levels, however. There's only a 10 percent chance you'll lose your entire investment with AT&T over a 10-year period. There is no dividend.
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