Isn't CDNow a better short than Amazon??
Granted all of the prices for the Internet stocks are ridiculously
overpriced and Amazon is the bellwether stock, but CDNow's story is
just that much more compellingly ridiculous. I agree with everyone's opinion about shorting Amazon, but there are also much riper targets available. Remember $30 going to nothing is the same as $90 going there too. Although it might be easier to obtain shares of Amazon to sell short from your broker. I have been having trouble getting CDNow shares to short.
CDNow has all the competition of other Internet record stores, plus
real record stores (Tower), plus all the bookstores, plus Amazon.com
itself. I see them as being at the bottom of this whole Internet hierarchy, so when it collapses it will occur there first. Also the whole idea of buying CDs over the net is a bit flawed. Amazon has a steady customer base from people like me working on computer projects and needing a technical book. Because of the demands of the project, I simply don't have time to hunt down the book, so purchasing the book over the Internet makes sense (same goes for hardware and software). But this doesn't apply to music CDs, I am only interested in price and typically only buy used CDs because they are much cheaper ($8 vs $13).
The following is from the CDNow Q1 finanicial report:
Revenue for the first quarter ended March 31, 1998 was $10.0 million, representing a 288% increase from $2.6 million for
the first quarter ended March 31, 1997. On a quarter to quarter basis, revenues in the first quarter of 1998 increased by
26.4% over revenues of $7.9 million for the fourth quarter of 1997.
Operating expenses increased to $10.7 million for the quarter ended March 31, 1998 from $1.1 million in the prior year
quarter and $7.6 million in the fourth quarter of 1997.
The Company's net loss for the first quarter of 1998 was $9.2 million, or $0.78 per share, compared to a net loss of
$544,000, or $0.07 per share, for the prior year quarter. The Company had a net loss for the fourth quarter of 1997 of
$6.6 million, or $0.90 per share.
So their net loss is almost equal to their revenue total. In other words, they would have done just as well to simply give their product away. |
