Friday December 18, 4:33 pm Eastern Time
TALKING POINT- How high can Amazon.comfly?
By Franklin Paul
NEW YORK, Dec 18 (Reuters) - Amazon.com Inc. can look forward to strong revenue growth and a market valuation larger
than blue chips like International Paper, but how high its stock will trade is anybody's guess, according to analsysts.
The market capitalization for Seattle-based Amazon.com, which sells books, CDs, videos, and audiotapes through its online catalog, soared to $15.5 billion this
week after a Wall Street analyst raised its price target to $400 from $150.
Amazon.com on Wednesday skyrocketed to a record high of $301.75, up nearly $60 on Nasdaq, before closing at $289, up $46.25 from the close on the
previous day.
Shares of Amazon.com rose again on Friday, climbing to close at $286.69, up $9.94, after again touching $289 intraday.
But market watchers voiced skepticism this week about the phenomenal rise of the stock, a leader in a flock of high-flying but money-losing Internet concerns.
Amazon has risen $200 in two months and trades seven times what it did six month ago.
''Maybe we're just frustrated with the volatility, but we believe stock movements of this magnitude should be justified by significant news, like surprising increases in
revenues,'' said BancBoston Robertson Stevens analyst Keith Benjamin.
''This sort of reaction is exactly the reason that we stopped publishing our price targets,'' he added, noting that target announcements add to stock volatility.
CIBC Oppenheimer & Co. analyst Henry Blodget based his $400 a share projection on aggressive revenue projections, saying that Amazon.com sales could reach
$1.5 billion in 2000, and $10 billion in five years.
Amazon.com, whose nearest competitors include Barnes & Noble Inc.'s (NYSE:BKS - news) Barnesandnoble.com and Books-A-Million Inc.(Nasdaq:BAMM -
news), reported revenues of $357 million for the nine months ended September 30.
It is expected to maintain its lead in the online bookselling market, which Forrester Research Inc., a Cambridge, Mass.-based research group, predicts will grow
from $630 million in 1998 to $3 billion by 2003.
But Merrill Lynch analyst Jonathan Cohen, who has for months maintained a ''reduce'' rating on Amazon, rebutted Blodget's view, saying on Thursday that
Amazon's stock could trade as low as $50 in the year or so.
''Amazon.com enjoys almost no significant competitive advantage in a market characterized by razor-thin operating margins,'' he said in a recent report.
''The company's success in generating revenues has come at the cost of very great operating losses, which we expect to continue for a substantial period of time,''
he said.
Indeed, Amazon.com's third quarter loss, excluding one-time items, was $0.49 a share, versus $0.21 in the previous year, as marketing and development costs
more than tripled. Analysts expect Amazon.com to lose money for at least the next two years.
Wheat First Union on Thursday downgraded its rating on Amazon's shares to hold from outperform, citing concens that fourth quarter results may fall short of
predictions.
BancBoston's Benjamin maintained his buy rating on Amazon.com. He says its new ''Shop the Web'' product, which points Web surfers to other online shopping
sites, may grow its audience and reap higher margins, a vital step toward driving its revenues higher.
''(Amazon.com's) market capitalization...can make sense relative to the opportunity for a small shift of retail dollars from offline to online, which could entail big
dollars,'' he said. |
