08:19am EST 17-Nov-98 Credit Suisse First Boston (Buyer, Lise (650) 846-6619)
AM Call: AMZN: Enters The Video Business FBC
CREDIT SUISSE FIRST BOSTON CORPORATION
Equity Research-Americas
BUY
Amazon.com (AMZN)
This morning, Amazon.com will officially unveil its online
video retail service and will increase the offerings on its
gift selection tab. The video site will offer information,
reviews, gift wrapping and efficient shipping on the more than
60,000 videos which it offers for sale.
The total relevant video market exceeds $8.0 billion in annual
sales, as compared to the estimated $12 billion music market
and $26 billion domestic book market.
While difficult to predict exactly how large Amazon's share of
this market will be and how quickly the company will reach
that level, we believe it instructive to note that in the
first full quarter of music sales, Amazon generated $14.4
million in music revenue. Those results exceeded the
quarterly totals for all of the incumbents in the category.
As we have expected Amazon to enter the video business since
last spring's acquisition of IMBD ( the Internet Movie
Database), we are not changing any of our estimates at this
time. We continue to believe that Amazon.com is very well
positioned for a very strong holiday season. Therefore, we
expect revenue for the quarter to approach $200 million and
maintain our EPS estimates of ($1.71) for this year and ($1.67)
for FY99.
We reiterate our Buy rating for long term holders despite the
fact that we do not expect the company to show an operating
profit until mid-2000. On a near term basis, sentiment and
emotion can, and likely will take this stock in multiple
directions depending on the day. Nonetheless, we believe
Amazon.com is on course to demonstrate the economic power of
business models which leverage the internet. Our Buy
recommendation is targeted at fund managers who have multiple-
year investment horizons.
Summary
ROIC
Total Debt (09/98) 340M
Book Value/Share (09/98) $3.58
WACC
Debt/Total Capital (09/98) 65.4%
Common Shares 50.2M
EP Trend2
Est. 5-Yr. EPS Growth
Est. 5-Yr. Div. Growth
On 10/28/98 DJIA closed at 8371.97 and S&P 500 at 1068.
2Economic profit trend.
Amazon.com "opened its doors" on the World Wide Web in July
1995, and now offers millions of book and CD titles in addition
to select videos, software and other products. Amazon.com has
quickly become a leading on-line retailer and one of the most
widely used and cited commerce sites on the World Wide Web.
Amazon.com, strives to offer its customers compelling value
through broad selection, high-quality content competitive
pricing, personalization and a very high level of customer
service. |
