By L.C. Jacobs: Subscribe to L.C.'s RSS feed
October 13, 2011 12:06 PM EDT
Amazon.com's Kindle Fire tablet has revitalized the tablet segment, primarily via pricing, but that's hardly a transgression in U.S. commece, hence it goes without saying that I'm Reiterating my Buy rating for Amazon.com (AMZN), first discussed here on Oct. 3, 2011 at a price of $211.98.
What's more, in my interpretation, we're looking at a "Camelot" in tech -- one in which a variety of devices in tech, from several suppliers, raises the profile of the value and utility of the gadgets -- including introducing a new segment of society to the products. Amazon is part of the mix and that bodes well for the stock, long-term.
Kindle Fire Creates Positive Chatter
Amazon's (AMZN) new Kindle Fire tablet, like the launch of Apple's (AAPL) iPhone 4s, has created a buzz around Amazon's stock, which traded Thursday at mid-day up 49 cents to $237.30.
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.
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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.
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 $2.06 and $3.32, and each EPS estimate looks about 10 percent low, according to my analysis.
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