LP, yeah I was probably a little rough on Benji, but
I don't think he'd have been accused of poor judgment,
if he'd downgraded AMZN to "sell on price basis". After
all, the stock traded as high as his high side target times
three. Or, he could upgrade his target, and keep the buy rec.
But what would that target be? We assume if the rec. is buy,
then target is higher than the current price, no? What
would be the justification, say for a $150 target? Only that
earnings are growing faster than expected (ie, much faster
that +50% per year), or that margins are improving, or that
sales are growing faster than expected. But instead sales
growth is dropping (we'll know for sure in a couple of weeks).
Maybe the rumored EGGS acquisition will go through, and maybe that's what
the 5 mil. shares have been set aside for. They're both WA based
companies, and there's synergy (enough), and a lot of costs can
be swept under the acquisition rug. It'll be interesting to see
how AMZN's stock is valued, maybe the median price over the last
6 months (I'd guess 60) or something like that. I don't know how
they'd throw stock in the deal, and still make it a pooling of
interests though. Right now (after the run up from 9 to 24 in
the past week/so), EGGS is trading at 2x sales with a mkt. cap.
of 500 mil. Maybe the EGGS shareholders would take a 50% premium
over that, and their stock price would be valued at $35. Using
some rough numbers, 2 EGGS shares for one AMZN, might make it
interesting, but that would value EGGS at 2.3 bil. mkt cap,
on 293 mil. in sales. Doesn't make sense to me.
It is interesting the low premium placed on other retailers on the
net. Microwarehouse 2.15 Bil. in sales, and is valued at a PSR
much less than one, 0.25 in fact, with a market cap. 500 mil.
No debt, and $100 mil. in cash ($3/share, on a $20 stock). Trading
at a PE of 18, and growing earnings at 19% (projected) MWHS looks
like a good deal.
The only thing I can think of that might help AMZN's margins would
be for it vertically integrate, by perhaps buying one of the private
companies (B&T or Ingram) that it gets its books from. That might
be seen as good news, but it puts AMZN squarely on the map as a
bookseller. |
