Glenn,
You know I'm short AMZN, but here is my late night case for being long -- or at least not short -- the stock (as you know, I like to look at and debate both sides of an issue):
1. The Street expected revenues of $73MM. AMZN blew that away with what has been called "AMIZONICAN" earnings of $87MM. You have to admit that this is an excellent gain over the Christmas quarter. BKS and BGP may show a revenue decline this quarter of as much as 33% (as is typical). AMZN showed almost a 33% gain. It is on track to have close to $500MM sales this year, not including its new acquisitions.
2. Indeed, AMZN is now the 3rd largest bookseller in the U.S. Not bad for a company that went public just 1 year ago. At its current rate of growth, and with recent (and doubtless future) acquistions, what is to stop AMZN from generating revenues in excess of BKS or BGP within a few years, perhaps justifying a market cap in excess of those companies based on its revenue growth rate?
3. The Street clearly does not care about the loss of $9M this quarter. Heck, the loss was slightly less than 4Q97 and the gross margins in fact improved. Nor does the Street care about the new $275MM gross proceeds junk bond (even if it likely will have a face value of some $500MM). Perhaps the Street figures that AMZN intends never to pay this debt out of earnings, but to do a secondary when it comes near time to begin repayments. If the stock is trading at, say, $100 post split by then (the same as $200 pre-split), what does a little dilution matter?
4. AMZN is now one of the top-dog, bellweather internet stocks. A proven revenue machine. (Once again, the accrued debt can be offset later by a little dilution, and those deferred charges -- like the new $55M charge -- will be a nice offset to earnings when the taxman cometh.) In any event, AMZN's revenue at all cost model is what the Street seems to want at this stage of the internet growth game. Why fight that view? (Remember when we fought the anti-ASND analysts?)
Gary Korn
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