Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Mark Fowler who wrote (37687)	1/29/1999 9:20:00 PM
From: Dr Smith	Read Replies (3) \| Respond to of 164684

BancBoston advised retail investors to jump in before the 26th! Now my question is this, why the big rush? And why did Keith Benjamin cut estimates of profitability two years out? He did it on the 27th, a day after the drop dead date. The damage done to this stock by daytraders is shameless. What about Amazon long term?

To: Mark Fowler who wrote (37687)	1/29/1999 9:20:00 PM
From: MoonBrother	Read Replies (2) \| Respond to of 164684

Famous Internet Analyst CIBC Oppenheimer's Mr. Blodget Gives Positive Comments on AMZN's Latest 1.25b Bond Offering. Enjoy. ------------------------------------------------------ 09:41am EST 29-Jan-99 CIBC Oppenheimer (H. Blodget 212 667-4509) AMZN AMZN: Raising Some Petty Cash CIBC Oppenheimer January 29, 1999 Internet/Electronic Commerce Amazon.com Henry M. Blodget (212) 667-4509 Raising Some Petty Cash Elizabeth Anning (212) 667-8321 Investment Conclusion UNEDITED: In the interest of timeliness, Rating: BUY this report has been made available to our AMZN-OTC(1/28/99) $122 customers before editing has been completed. 52-week $199 1/8-9 1/4 It will be replaced with an edited version Shares Out 154 Million shortly. Float 58 Million Shares Amazon.com sold a convertible bond offering Market Cap $18.8 Billion yesterday, raising a paltry $1.25 billion Div/Yield Nil/Nil (on very good terms). The offering was Fiscal Year December increased from $500 million at the last Book Value $0.90 per Share minute, apparently because of enormous 1999E ROE 0.0% demand. Investors concerned that LT Debt $348 Million Amazon.com's spending habits might cause it Preferred Nil to burn through too much of its existing Com Equity $45 Million $400 million war chest (an unwarranted fear, given that the company's cash flows are basically break-even), now need not be so concerned. The company now has nearly $2 Earnings per Share billion in cash. 1997 ($0.24) 1998 ($0.50) Amazon.com has always been focused on the 1999E ($0.90) long term, and this offering is all about the long term. Amazon.com believes (and we P/E Ratio agree) that the leading e-commerce company 1997 NM will one day be able to serve tens of 1998 NM millions of customers and generate tens of 1999E NM billions of dollars in annual revenue. Amazon.com believes that in order to have the best shot at being that company, it must invest heavily now. With $1.25 billion of new cash in the bank, it can now invest as Additional Information heavily as it wants. Total Customers 6.2 million New Customers in Q 1.7 million The biggest concern among investors is that Cust. Acquisition Cost $11 online retailing will be a zero margin Inventory Turns 27X business, in which companies sell products at cost and Amazon.com goes from being a Company Description: high-profile customer service company to a Amazon.com sells books, music, fulfillment shop (we don't think this will and more from a web site, happen, but it is a possibility). The good amazon.com. news for Amazon.com investors, then, is that the company can now implement whatever strategies and/or investments it thinks makes sense, whenever they make sense--including, for example, attempting to price almost any competitor out of business (with $1.5 billion in the bank, you can lose hundreds of millions a year for many, many years--most start-ups can't). It could also buy companies with cash or pay bonuses in cash or do a host of other things with cash. The bonds have a 4.75% coupon and a 27% conversion premium ($156). If Amazon.com's stock increases 50% in the next few years, it can call the bonds, converting them immediately to stock. What this means is that the company has effectively just issued $1.25 billion of new equity at $156 a share (why do you issue a convertible bond instead of equity? Because, in part, you think that your stock is undervalued.). If and when the bonds convert, they will increase shares outstanding by about 7 million shares (4% dilution). That's cheap money. The risk, of course, is in the fact that this is a bond--Amazon.com actually owes people money. If the business falls apart and the market cap tanks, Amazon.com might have to issue equity at far below the current price to pay off the debt, thus significantly diluting shareholders. We believe in Amazon.com's long-term story, and we don't think this will happen--but we admit that it, too, is a possibility. As always, we recommend that investors who believe in Amazon.com's long-term story buy the stock, and investors who don't, don't. In our opinion, thanks to this offering, Amazon.com (and its shareholders) are now in a much better position to win long term. Our quarterly EPS estimates are shown below. 1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. Year 1997 Actual ($0.03) ($0.06) ($0.07) ($0.08) ($0.24) 1998 Actual ($0.07) ($0.12) ($0.16) ($0.14) ($0.50) 1999E Current ($0.29)E ($0.26)E ($0.21)E ($0.13)E ($0.90)E