Excerpt from this weekend's Barron's re: Amazon.com:
Q: Paul, do you own any Internet stocks?
Wick: Actually, I think everything in this space would make my list of pans. The whole sector is outrageously overvalued. It's a shocking example of speculation gone overboard. In many instances, the barriers to entry are completely nonexistent. Some companies appear to have a reasonable, sustainable business model -- I think Yahoo! is actually an okay business. On the other hand, at 25 times what Wall Street is expecting for 1998 revenues, the valuation is insane.
Q: A little pricey, anyway.
Wick: My favorite negative one would be Amazon.com. It has a $1.4 billion market cap on a $280 million sales forecast for 1998. The company won't break even until 1999 at best. And yet you look at Barnes & Noble, which has a $1.8 billion market cap, doing sales of $2.8 billion, and making a profit, with what I think is a more sustainable franchise. Barnes & Noble has the superstore concept, a proven, viable concept. You can't get coffee and donuts online from Amazon.
Q: But Wall Street seems to think Amazon has a good business model.
Wick: The books business has lousy demographics. Americans are reading fewer books every year. It's like the trend in newspaper readership. The business has terribly low profit margins. And I don't see what's so great about the business model. |
