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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Sarmad Y. Hermiz who wrote (64651)	6/25/1999 3:06:00 PM
From: Eric Wells	Read Replies (3) \| Respond to of 164684

Yes, AMZN does have large revenues. But they also have very large losses. Their annual sales are currently at $800 million - but their income is negative, with an annual loss of -175 million. Here, in summary, are the reasons why I think the price of AMZN is too high: 1. Price competition on the internet is fierce - therefore, profit margins on "retail" items (such as books, CDs, etc.) will be very thin. If Barnesandnoble.com sells a book at a lower price than Amazon, a customer can switch over to Barnesandnoble.com with very little effort. And new internet sites to allow users to search for the best bargains on goods will make it easy for customers to find the best price. 2. The cost of customer service for internet companies can be very high, and can act as a drain on profits. Internet technologies are still relatively new - and things sometimes break, or don't work right. Amazon spends a lot of money on customer service and is attempting to use its reputation for good customer service to draw business. But it is costing them a lot of money and eating into their profits - and will continue to eat into their profits indefinitely. 3. Barriers to entry on the internet have come down a lot over the past two years. Three years ago, Amazon and Yahoo were technological pioneers - they were breaking new ground in an area that few companies were aware of. Now, the internet is everywhere. And established "bricks and mortar" name brands can set up internet sites with ease, and capitalize on their established names. This means more competition. 4. Bond interest rates have gone up - this will result in money flowing out of stocks and into bonds. In general I think the market will be up and down, and go just about nowhere for the next seven months - the summer months are generally slow - and after summer, a lot of big investors will be concerned about the potential effects of Y2K, and will hold off on making any big investments. I think AMZN will do one of two things over the next seven months: it will either follow the rest of the market, going up and down and doing nothing, or it will go down (due to the first three issues I list above). However, taking all these points into consideration, I think there is little chance AMZN will go up. I welcome comments. Thanks, -Eric Wells