IMHO this borders on the sleazy.
LP
FOOL PLATE SPECIAL
An Investment Opinion
by Louis Corrigan
Amazon Delivers
Throw in a little bit of actual news, and investors in
online book and CD retailer Amazon.com (Nasdaq:
AMZN) end up looking paralyzed with confusion.
It's hardly surprising given that the second quarter
earnings announced after the close yesterday were
predictably better than expected, but not stunning
enough for other investors to figure this company is
now worth more than $6.7 billion. So the stock
stutter-stepped higher to $138 1/2 at the start of
trading only to fall back to $132 1/4, down $1 3/4 at
midday.
Still, Amazon.com's numbers were terrific.
Revenues rose to $116 million, up 316% over the
year-ago period. More significant, they rose 33%
over first quarter sales, which were also up 32%
over December period sales. On a pro forma basis,
excluding $5.4 million in goodwill and amortization
expenses from three recent acquisitions, the leading
online retailer reported a net loss of $15.8 million, or $0.33 a share, versus a
loss of $6.7 million, or $0.16 a year ago. That number blew away the analyst
consensus estimate calling for a loss of $0.43 per share. Including the
charges, the loss was $21.2 million, or $0.44 per share.
Gross margins rose slightly to 22.6% from 22.1% in the first quarter. The
company also boosted ad spending significantly, from $19.5 million (22.3% of
sales) in the first quarter to $26.5 million (22.8% of sales) in the June period.
It's trying to fend off competitors, especially Barnes & Noble (NYSE:
BKS), which has launched an aggressive ad campaign for
barnesandnoble.com. The most compelling news in Amazon's report
yesterday was that the company added a better-than-expected 880,000 new
customers in the period (on top of a 750,000 customer account increase in the
first quarter). That raised its cumulative total to 3.14 million accounts. Equally
important, a whopping 63% of sales came from repeat purchasers. That's up
from 60% in the first quarter and suggests that this commodity retailer
continues to instill tremendous customer loyalty, though it's not clear what
percent of the customer base actually accounts for those repeat purchases.
For comparison, N2K (Nasdaq: NTKI) yesterday reported that sales rose
40% over the first quarter to $10 million as the online music retailer added
130,000 customers to bring its total to 352,000. Its marketing expenses were
$10.7 million during the period, or 107% of sales. Meanwhile, CDNow
(Nasdaq: CDNW), which also reported yesterday, grew revenues by just 16%
during the quarter while adding 137,000 customers to bring its base to 569,000.
It spent $9 million on marketing, or 77% of sales. Repeat purchasers
accounted for 52% of N2K sales during the quarter and 58% of CDNow's.
These numbers suggest that Amazon.com is demonstrably whooping some of
its top competitors in growth and loyalty metrics even as they work from a
smaller base and continue to grow rapidly. Given that Amazon.com is sitting
on a $340 million war chest that dwarfs the current resources of all of its
major rivals, including Barnes & Noble and Borders (NYSE: BGP), the
company can continue spending heavily on marketing for years to come in
order to gain market share. Even so, the stock trades at 14.4 times run-rate
sales, a daunting price premium. |
