There are two articles in Barron's this week (available on-line) that I recommend:
1. Amazon.com, No Earnings in Sight and Competition Looming, Prepares Junk Offering
2. Tech Players Gather To Ponder Conundrum: What's Left to Buy When Everything's So High?
Glenn will appreciate the following quote from the first article:
"But some of the investors we spoke with weren't buying it. Retailers, in general, have not fared well in the junk-bond market. There are very low barriers to entry and competition is fierce. Barriers are even lower for Internet retailers, which don't need to carry inventory or rent space to set up shop. And Internet shoppers can browse the competition by just clicking a button. No car needed"
All of us who feel "in the dark" will appreciate this quote:
"Joseph Welsh, a high-yield bond analyst at Oppenheimer Funds, reports that his firm's fund doesn't plan to buy into the offering because Jeff Bezos, Amazon.com's CEO, won't be at the investor meetings the company is holding to market the bonds. "It's basically unheard of," says Welsh. "We can't lend to a company THAT WON'T GIVE US ACCESS."
Also, take a look at this:
"To be sure, the offering will probably be sold with little problem considering the strength of the junk-bond market and the volume of deals. Some investors will probably reason that Amazon.com has a large equity base THAT IS JUNIOR TO THE BONDS, providing safety. However, equity bubbles are famous for bursting, especially when a company is losing money even before the big competition makes itself felt."
The second article is a report from last week's H&Q conference. An interesting quote:
"While H&Q officially has buy recommendations on a host of mainstream Internet plays -- Amazon.com, Yahoo, Lycos, America Online -- [Bruce] Lupatkin [the director of research at H&Q] ADVISES AGAINST BUYING THEM AT CURRENT PRICES. "I'd tell people to wait," he says. "They're not cheap. Patience is a virtue; you don't need to own them right here, right now."
Gary Korn |
