I don't know why Merrill is getting all the heat. Remember DLJ's, now CSFB's Jamie Kiggen who wouldn't return your call after the $500 ps price target the clown put out on Amazon.com?
Guess what? Here's Kiggens new price target.
>>Rating: BUY 12-Mo. Target: $20
AMZN posted Q1 revenue of $847.4M (-24% q/q, +21% y/y), which was $47.4M above our forecast of $800M. Unit growth was up 30% y/y, driven largely by lower prices on books and strong growth internationally. Gross margin was 26.3%, up from 24.6% in Q4, and above our expectation of 24.8% and up 20 bps from Q1 last year (26.1%). Pro forma net EPS of ($0.01) was well over our consensus-matching estimate of ($0.09). The company ended the quarter with $745M in cash and marketable securities (vs. $996.6 million at the end of Q4), above guidance of approximately $500-$600 million.
U.S. books, music and video revenue decreased by 18% sequentially and increased 8% y/y to $443 million, even as used product was a higher mix of US goods from last year (Amazon does not book the gross merchandise value on used products). Used merchandise comprised 23% of U.S. orders vs. 15% last quarter and 4% a year ago.
The company made significant progress on expense controls with cash operating expenses declining to 23% of sales from 33% of sales year over year. Fulfillment costs were 10.6%, down from 13.5 a year ago.
Amazon announced another move to lowering prices to consumers, specifically, reducing the minimum price for its 30% book discount from $20 to $15. The company plans to continue to strategically use price to drive consumer adoption and volumes.
We are increasing up our Q2 revenue estimate from $750M to $780M (guidance ranges from $765M-$815M), and increasing pro forma net EPS from $(0.09) to $(0.07). For 2002, we are raising our estimate for pro forma operating profit from $49.3K to $113.2M (last quarter's guidance was at $30M and above and this quarter's guidance is over $100M). We are increasing pro forma net EPS from ($0.19) to ($0.05).
This was a very strong quarter for Amazon in terms of both revenue and margin growth. We continue to believe that steady, incremental growth in both areas will drive Amazon's shares higher over the course of the year and would recommend investors using intra-quarter pullbacks as buying opportunities. |
