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

To: Oeconomicus who wrote (5197)	6/8/1998 5:57:00 PM
From: Oeconomicus	Read Replies (3) \| Respond to of 164684

OK, boys and girls, I said I'd be back with more on the BARS report (dated 6/3). Let's talk numbers. Revenues are projected to be $440.8 million this year ($103.3 mil in Q2) and to grow as follows after this year: 49% in '99, 26% in '00 and 20% in '01. Guess they didn't believe in that "$1 billion by 2000" goal as they don't even have them quite there for 2001 ($992 million). Where do they get the 88 cent profit in 2001? First, they assume that gross margins will improve from 22% now to 25.7% in '01. I'll accept that, but that hardly gets them to profitability. The biggest improvement is in marketing & sales and product development. Together, these items came to 34.8% in '97 and 30.0% in Q1 '98. RS projects them at 28.9% for all of '98 then brings them down to 14.1% by 2001. In other words, they will spend approximately the same amount of money, in absolute dollars, on almost a billion of revenues as they will spend this year on $441 million. For comparison, consider that BKS spent last year 19% of revenues on "selling & administrative" expenses, not including rent or depreciation on all those stores, while RS assumes AMZN will get those costs down to 15.8% on a much smaller revenue base. Considering that AMZN has to discount just to offset shipping, it's difficult to believe that their operating expense ratios would be that much better than BKS' "before brick & mortar costs" expense numbers. Consider also that this expense ratio for '98 for AMZN is 30.9% (39.3% for '97), almost twice the ratio assumed for '01. Let's see. On $441 million of revenue, 30.9% operating expenses come to $136 million. For 2001, 15.8% of $992 million revenues is $157 million. So, they are arguing not only that they will blow BKS away on operating expenses even without "brick & mortar costs", but also that their operating expenses are essentially fixed from here on out. One final note, in arriving at 88 cents per share in 2001 (which is based on $54.3 million of Net Income and 61.9 million shares, BTW), they assumed on $8 million of net interest expense for the year. Even assuming they have significant cash left by 2001, I'd figure at least $30 million and probably more of net interest expense. Regards to all, Bob PS: If you are an E*Trade customer, take the free trial of "Professional Edge" and you can read the report.