Nasdaq: AMZN) $16.88
Long Term Attractive
Lauren Cooks Levitan, Branded Internet
"We have performed a revenue sensitivity analysis incorporating three major variables: 1) sales of toys and video games, 2) sales of consumer electronics products, and 3) the impact of Amazon's free shipping promotion on total shipping revenues," said Levitan. "According to our analysis, in 74% of the cases, Amazon meets or exceeds our Q4 revenue estimate of $1 billion, but with limited potential to exceed the high end of the company's stated range of $950MM - $1.05BB by more than 10%. Based on our analysis of Amazon's Delight-O-Meter, a real-time update of how many items were ordered November 2nd - December 23rd, we estimate Amazon will end Q4 having sold approximately 41 million items. We believe the key to Amazon achieving meaningful revenue upside is what mix of those sold items are consumer electronics which carry a substantially higher average order size than Amazon's other categories. Unfortunately, we have limited visibility on this as Amazon has never disclosed sales data for this single category. That said, given Amazon's noticeable out-of-stock position on many CE products and lack of authorization by some key vendors, we believe Q4 revenue upside could be limited. We believe Amazon's Delight-O-Meter was effective in diverting investor attention to sales levels from fulfillment efficiency, which we believe is the key to Amazon's ability to generate sustainable profits longer term. While we recognize strong revenue growth can result in operating leverage, we continue to question Amazon's broadlines strategy (in its current form), which we believe makes it extremely difficult for the company to fulfill diversified product orders efficiently. Given we expect a high degree of investor scrutiny over Amazon's Q4 results and are challenged to identify a post-holiday season catalyst, we recommend investors remain cautious of Amazon's stock."
Unless otherwise noted, prices are as of Wednesday, December 27, 2000. |
