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

To: put2rich who wrote (10997)	7/21/1998 10:00:00 AM
From: Moneysmith	Read Replies (1) \| Respond to of 164684

Some interesting comments from the August issue of Smartmoney: SmartMoney: Net Values: Will The Next Great Stock Be Found In Cyberspace? How To Separate Today's Highfliers From Tomorrow's Let's take Amazon.com, that pioneer of e-commerce. It has recently experienced a 236 percent runup in its stock. How would traditional research like examining its price/earnings ratio value this company? Well, Amazon.com trades at around $99, a lofty price for a company expected to lose $1.15 a share in its 1998 fiscal year and 61 cents in 1999. But P/E is an unfairly rigid measure of such a young company's potential, you say, so let's try price/sales (Amazon.com's is a stratospheric 24.5, compared with other booksellers' ratios of 1) or price/book value (182) or even price/cash (the company doesn't have any cash, but it does carry a debt/capital ratio of 79.5). Okay. Let's cast aside these traditional some might say moribund measures and try to value these Internet stocks the way the experts do. Take, for instance, Morgan Stanley's Mary Meeker, probably the sector's most influential analyst right now. Meeker generally values a company based on revenue minus expenses projected out to the year 2001. With those numbers, she runs a series of complex calculations that determine at what level a stock should be trading. Based on that analysis, Meeker has been bullish on Amazon.com of late, but now says, "I felt a lot more comfortable talking about Amazon a few months ago" when it was 30 points lower. Then there is Keith Benjamin, who puts a different methodology to work at the San Francisco brokerage firm BancAmerica Robertson Stephens. He looks principally at how many people are turning to the given business and how that feeds into earnings. With Amazon.com he estimates that over 8 million people will be using the site by the year 2001, contributing to revenue of $120 per user and net income of over $7 per user. Taking these figures, he then projects an earnings number for the year 2001, discounting expected expenses. Assuming that earnings should trade at a multiple of 50, he then comes up with a current price target based on those numbers. Given all this, he figures, Amazon.com should be trading at $44, 52 percent lower than its current price. And then, of course, there is the very real possibility that this bookselling phenomenon is just a sitting duck, with Barnes & Noble -- a company with 1,011 stores, $2.8 billion in revenue and 27 years of success under Chairman Leonard Riggio vowing to blow Amazon.com off the Net one day soon.