Copyright c 1998 The Seattle Times Company
Posted at 01:23 p.m. PDT; Tuesday, July 21, 1998
Spotlight is on Amazon.com
by Alex Fryer
Seattle Times business reporter
One thing is clear: Amazon.com will report a second-quarter loss
tomorrow.
That, everyone can agree on.
But exactly how far Amazon.com will go into the red has Wall Street
scratching its head.
Three major forecasting firms have come up with different estimates for
the second-quarter loss, to be announced after the financial markets
close tomorrow.
But in the short term, losses may not affect the company's prospects or
high-flying stock price.
Amazon.com's strategy of plowing revenues back into the company is
well-known to most analysts. Instead of profit, Wall Street is looking
for evidence Amazon.com has expanded its market share of the online
bookselling market.
"Most people will focus on growth and numbers of customers," said Ryan
Jacob of IPO Value Monitor. "They're concerned that subsequent growth is
keeping pace with previous growth."
Last year, more than 1.5 million people bought books through Amazon.com,
and revenue grew by 838 percent to $147.8 million.
If Amazon.com posts numbers tomorrow that show the growth curve is
flattening out, the market could respond with a massive sell-off of its
stock. Amazon.com was at $132.063, down $5.438 at the close of trading
after hitting an all-time high of $147. Yesterday, the stock gained 15
percent, or $17.688.
A sell-off could happen anytime, Jacob said.
"If the quarter does not meet expectations, the stock could fall
precipitously," Jacob said. "But even if the stock does meet
expectations, the stock could fall. My feeling is that, with a lot of
earnings coming out, stocks will be more volatile."
How the stock will react to the numbers remains a mystery, as does the
extent of the loss. IBES, a research firm that polls analysts, predicts
a loss of 46 cents a share. Zacks Investment Research said the loss will
be 38 cents a share, and Nelsons Research estimates the loss at 43 cents
a share.
Individual analysts' predictions vary even more. Steven Horen of
NationsBanc Montgomery Securities, for example, estimates a loss of 54
cents a share. Based on future revenue and profit margin, NationsBanc
Montgomery Securities said Amazon.com's stock is worth between $54 and
$84; BancAmerica Robertson Stephens maintains a price target of $44.
Besides the raw numbers, Amazon.com also may announce details of its
expansion into online video sales and the European market.
In April, Amazon.com acquired Bookpages, a British online bookseller;
Telebook, a German online bookseller; and Internet Movie Database, a
comprehensive site of movie information on the Internet. Amazon.com
incurred expenses of $55 million for all three transactions.
"It's clear they will enter more than the books and music market," Jacob
said. "They are pioneers of e-commerce."
Alex Fryer's phone message number is 206-464-8124. His e-mail address
is: afryer@seattletimes.co |
