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

To: Glenn D. Rudolph who wrote (36398)	1/24/1999 5:48:00 PM
From: brian z	Read Replies (1) \| Respond to of 164684

From Weekly WEB Report AMAZON.COM MOVES TO THE TOP OF THE LIST- We would pick AMZN as our first choice among fallen angels. The stock is off 24% this week and 42.5% since the beginning of last week. Looking back to 1998, there were plenty of opportunities to buy the stock on dips and make money. From July 1998 to January, we have seen five major corrections and rebounds, with the stock still up over 200% from its July lows. The down/ups from peak to trough, starting in the beginning of July, end of July, August, September, and November were -29%/+39%, -23%/+27%, -45%/+56%, -26%/+153%, and -14%/+193%. In January, the drop has been 43%. While this might not be the near-term bottom, it feels close enough, particularly as the company is scheduled to report next week. It had previously announced strong revenues without details. We believe the market opportunity is the more important factor in the stock than valuation. We believe Amazon has built the brand people think of first for Web shopping. We believe this will enable revenue volumes that can yield significant profitability long-term. We believe the key question for Amazon remains its ability to build fulfillment capability in more product categories to exploit its brand and growing audience. The formula started with rapid delivery of a broad selection of books, with the help of an existing distribution system. The company is now building the capability to go directly to the book publishers and hold inventory, which should help both margins and service. We expect the revenue mix to shift over time from just products stocked by Amazon to more products from stores within the Amazon mall where it receives lead generation fees. Of course margins from inventory might range from 10%-30% depending upon product category, with rental revenues at near 100% incremental margins. We believe this e-tailing model can work for Amazon given their large, loyal customer base. The stock appeared sensitive this week to concerns about other Web e-tailers using price as a weapon. For example, ONSALE introduced a new AtCost service to offer computer-related merchandise at wholesale prices plus a fee of $10 or less. We do not believe this pricing gimmick is a direct threat to Amazon. Direct competitors, like N2K and CDNow have been promoting price in competitive desperation since last year and do not appear to have succeeded in stopping Amazon from continuing to gain share of the music category. Prospective competitors, like BUY.COM, want to sell a wider range of products at cost, using third-party distribution, depending on advertising revenues for the hope of profits. We wonder if this model can work. We believe consumers will continue to value aggregators of services, like Amazon, which can reliably deliver merchandise. We also believe that consumers appreciate the convenience, familiarity and reliability of Amazon.com and price alone will not drive consumers to other sites. The company's Q4 revenues of $250 million demonstrate that.