Gene, I'm new to this thread, but after reading the BARRON'S article, could not ignore it. I'm an investment advisor and run the oldest online investment service (started in 1981). First, the leverage on the common stock, noted by BARRON'S, is indeed worrisome, for it puts a great drain on any near term earnings.
What the article completely and totally neglected, however, were the unique services offered by AMZN to its customers, including searching, reviews of books and recordings, lists of items that might interest the customer, based on other customer interests, extreme care not to overcharge on postage and handling, etc. These services are better than those available in many traditional bookstores, and are better than those offered by online competitors. AMZN is clearly building loyal customers. As far as what the customer pays, consider that for many people, going out to a retail store, even one that discounts, would be considerably more expensive and time consuming, assuming one could find the right merchandise.
Though I judge investments on fundamentals (not on the basis of technical analysis), factors such as customer service are important in creating a difference between stores that sell essentially the same products. To keep this edge, AMZN recently bought a software firm, just to obtain services of the kinds of experts that have given AMZN the edge in online selling. I would not be surprised to see AMZN fall on Tuesday, perhaps as much as 20 percent, but having said that, I don't believe that the BARRON'S article fairly analyzes the stock, the management, or the potential.
Art Bechhoefer |
