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

To: Glenn D. Rudolph who wrote (72438)	8/6/1999 7:04:00 PM
From: Jeff Dryer	Read Replies (7) \| Respond to of 164684

Henry Blodget's assumptions are flawed in my opinion. Henry Blodget writes: We expect, for example, that online retailing will eventually amount to about 10% of the total $2.3 trillion annual retailing market, or about $230 billion. maybe... Amazon.com has clearly indicated its intention to be involved in most aspects of this market, and in most markets, the industry leader usually ends up with 30%-40% share. What is WalMart's market share of the $2.3 trillion annual retailing market (Henry Blodget's estimate)? Isn't it about 5%? So, why does Henry Blodget expect that Amazon.com's share of the online retail market is going to be greater than 5%? Henry Blodget is EXPECTING 30% PLUS???? Major alarm bells are going off. What about WalMart, Dell, IBM, Compaq, Office Depot, OfficeMax, and hundreds of other multi-billion dollar retailers who are or will be selling online? Even the combined Egghead-Onsale company is doing about $100 million per quarter in online retailing sales which is about 1/3 of Amazon's revenue. In my opinion, it is reckless of Henry Blodget to predict 30 - 40% long-run market share of the online retailing market. It devies common sense. Thirty percent of $230 billion is about $70 billion. Five percent (an estimated net income margin) of $70 billion is $3.5 billion. A P/E of 40 times $3.5 billion would generate $150 billion of market capitalization? about 7.5X Amazon.com?s current market capitalization of $20 billion. Five percent of $230 billion is about $11.5 billion. Five percent (an estimated net income margin) of $11.5 billion is $0.575 billion. A P/E of 40 times $0.575 billion would generate $23 billion of market capitalization? about the same as Amazon.com's current market capitalization of $20 billion. If it took the company 15 years to achieve this market capitalization, the long-term investor would recognize a 12% annual return (assuming 3% annual share-count dilution). If took ten years, the return would be closer to 20%. If it took the company 15 years to achieve this market capitalization, the long-term investor would recognize a 0% annual return (assuming 3% annual share-count dilution YOU HAVE GOT TO BE KIDDING ME. There is NO WAY, if Amazon is going to achieve anything close to 30% online retailing market share). Analysts are sometimes fools, dishonest, or both. I will bet that my estimate of 5% market share of the online retailing market will be much closer to reality than Henry Blodget's 30 - 40%. What prize will I win? nothing. And Henry Blodget's 30 - 40% market share estimate will long be forgotten.