Let's do a projection of AMZN's 2002 revenues based on projected 2002
revenues for the online industry.
“Online software sales in the United States are expected to soar to
$2.4 billion by 2002 from $258.9 million this year, market researcher
Jupiter Communications said. That projection places software far
ahead of music and videos, which are expected to reach $1.6 billion
and $575 million in U.S. online sales by 2002, respectively,
according to Jupiter estimates.”
Let's see….
2002 online sales projections
Software $2.4 billion (Jupiter)
Music $1.6 billion (Jupiter)
Videos $575 million (Jupiter)
Books $1.25 billion (Forrester research 2001 projection $1
billion) 2002? Let's say $1.25 billion
$1.25 + $.575 + $1.6 + $2.4= $5.825 billion
That's close to $6 billion for the entire online market of software,
music, videos and books for the year 2002.
How much market share can AMZN expect to take out of this pie?
Let's say they blow away Barnes&Nobles, Wal-mart, Books.com, Warner
Books, Borders.com, Shopping.com , cdnow, musicboulevard, soundstone,
bmgmusicservice.com, columbiahouse.com, towerrecords.com, Microsoft's
new bookstore, egghead software, and other present & future
competition.
Let's give AMZN a very generous 75% of this market.
That gives them a gross of $4.36 billion and a net (assuming 1% net
profit margin IF they can achieve profitability) of $43.6 million.
That's around 0.86/share earnings, giving AMZN a forward P/E
of over 140 for the year 2002.
And don't forget, in the following year 2003 AMZN will have to start
paying back the interest on the junk bond. How much will that be?
Only around $40 million dollars a year until 2008. And what about the principal?
Sound like a good investment to you?
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