Excellent News!!! Montgomery Started Coverage of AMZN with BUY rating
and 12-month target of $175. Calling it a "bust own". Enjoy!!!
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05:39pm EST 24-Mar-99 Montgomery Securities (A. Braverman 212 277-8296) AMZN
AMZN: Coverage Initiated With a Rating of BUY (1 of 2)
NATIONSBANC MONTGOMERY***NATIONSBANC MONTGOMERY***NATIONSBANC MONTGOMERY
AMAZON.COM* RATING: BUY
(PART 1 OF 2)
March 23, 1999 INTERNET NYSE: AMZN
Alan Braverman 212.583.8296, ambraverman@montgomery.com First Call
Barbara Coffey 212.583.8371, bcoffey@montgomery.com
Jennifer Klein 212.583.8433, jklein@montgomery.com DJIA: 9672
S&P 500: 1262
NMSGI: 145
Price: $119 3/8 FY Ends 12/31 1998A 1999E 2000E
52-Week Range: $199-13
Fully Diluted Shares O/S: 154.4MM Q1 (MAR) ($0.07) ($0.29) ($0.10)
Market Capitalization: $18.4 BB Q2 (JUN) (0.12) (0.24) (0.09)
Avg. Daily Vol. (3 Mos.): 10,600,000 Q3 (sep) (0.16) (0.20) (0.07)
Secular EPS Growth: 50% Q4 (DEC) (0.14) (0.15) (0.04)
1999E Revenues: $1,376 MM Fiscal Year ($0.50) ($0.87) ($0.30)
Market Cap./Revenues: 13.4x P/E N/M N/M N/M
12/98 Total Debt: $349 MM P/E/G N/M N/M N/M
12/98 LTD/Total Cap.: 72%
12/98 ROAE: N/M
12/98 Shareholders Eq.: $138 MM
12/98 Book Value/Share: $0.89
Dividend/Yield: NA
* NationsBanc Montgomery Securities LLC currently maintains a market in this
security.
Initiating coverage of Amazon.com with a rating of BUY
o We believe that Amazon.com is a 'must-own' blue chip stock for the new
Internet economy.
o Amazon.com is a retailer. It is the quintessential E-commerce company.
Amazon.com has perfected a superb e-tailing platform, which it has proven
is extensible from books to music, videos and gifts and beyond. The
extensibility of this platform can best be seen by the tremendous success
the company has had in rolling out these new categories of offerings.
o The Internet moves at lightening speed, and therefore so must these
companies' managements. We believe that Amazon's management team has
consistently proven that it is nimble and on the leading edge.
o Amazon.com is focused on the customer. Period. This, by the way is the
correct focus in our view. While in many ways it is just another retailer,
in fact Amazon isn't. Amazon offers its customers better value enabled by
the Internet and live by (our mantra) better, cheaper, faster.
Highlights
We are initiating research coverage of Amazon.com with a BUY rating.
Shares of Amazon are a must own for Internet investors in our view.
Business description
Amazon.com is a retailer. The company started selling books over the
Internet in July 1995 and since then has become the face of e-tailing, by
expanding from books to videos, music and gifts. The company opened the music
store in the September quarter of 1998 and is already the number one music
seller of the Internet. In November 1998, Amazon.com opened the video and gift
store just in time for the holiday rush and we expect Amazon will continue to
expand its platform in multiple other directions. Currently Amazon.com offers
4.7 million books, CDs, audiobooks, DVDs, computer games and gifts and has
served 6.2 million customers in 160 countries. While on the surface, it is just
like any other store, in fact it is not. The Internet has enabled the company
to develop three core assets which we believe are:
1.
Loyal Customers We often refer to Amazon.com as the Nordstrom's of the
Internet with upscale, loyal and repeat buyers
2.
Leveragable Platform Amazon.com has a highly leveragable operating
infrastructure of people, distribution, brand and traffic.
3.
User Database The most overlooked asset of the company is its unique
collection of buyer behavior data. This data can be mined within and across
product categories to deliver compelling buyer insights for new products,
businesses and partners.
The Internet as a distribution source also distinguishes Amazon.com. The
Internet by design is a two-way electronic interactive media. By being
electronic Amazon.com can track a person's purchases, and make recommendations
and suggestions based on the historic purchases of 6.2 million customers. The
two way nature of the media means that if the customer gives permission
Amazon.com, the company can e-mail a customer, just as a sales person could
call, to remind them that the book they heard about is finally in print and 'do
they want to buy that book now?'
If this is familiar it should be since it is like going to the community
store and speaking with people that know your tastes and previous buying
history, BUT it is on a grand electronic scale, made feasible by the Internet.
Remember mass customization? Amazon.com is working to perfect the concept for
the retail masses.
Amazon is focused on the Customer
Whenever we talk to Amazon it is clear that the customer is at the heart of
everything it does. We strongly believe that this is not just the right way to
do business, it is the only way to do business. This focus has paid off. As of
December 1997, Amazon had a cumulative customer count of 1.5 million, as of
December 1998 this had increased to 6.2 million. Not only has there been a huge
increase in new customers, in the December 1998 quarters 64% of orders were
from repeat customers. These two data points highlight the fact that Amazon.com
attracts and keeps customers.
Amazon.com realizes the value of its customers. We believe Amazon's
customer base is at the heart of its stock valuation. Amazon.com is delivering
what its customer wants. In return, its customers are highly satisfied and are
making repeat purchases. The Internet enables the ability to add value to the
customer by delivering products in a better cheaper and faster way. Amazon.com
could prove to be a poster child for this concept.
o Better--since the electronic version of everyone's favorite sales person is
always on duty and never takes a holiday, and has the combined knowledge of
what 6.2 million shoppers have purchased.
o Cheaper-- since Amazon.com has a more efficient cost structure than
traditional stores without all the expensive real estate, salesclerks. It
also levers economies of scale, for example in national advertising.
o Faster-- since the shopper can find what he or she wants before you can
start your car and shop/buy whenever and wherever they want--at 2 am from
home or mid morning at work when your boss thinks you're slaving away on
that presentation.
It's the platform
Amazon.com has a great operating infrastructure or platform. Compared with
a traditional business, it take relatively little for Amazon to add another
product line to their business. A few more servers, tweak the interface, bolt
on a few software elements to the back-end, a few more CSR's and add some
inventory and promote it. We are significantly oversimplifying it, but Amazon
can launch new products and categories much faster and cheaper than can
traditional stores.
While the platform itself is extensible, we believe that one of the reasons
that Amazon's new categories did so well when they were introduced was their
ability to take advantage of an established brand, traffic, reputation and
image that Amazon.com has created. To buyers, we believe the Amazon brand means
easy to find products, helpful recommendations and great customer service, more
than it means books. This is the power of the brand. Amazon has created a brand
and earned the loyalty of customers this has enabled the company to enlarge its
brand from its roots as a bookseller to be the premier E-commerce Company it is
today.
We also believe that the corporate infrastructure is another type of
platform that the company has created that is key to the company's future
success. The company has great management. Period. We can not stress enough the
value of good, smart people who really understand the Internet and have the
vision to make it work. This is the stuff legends are made of. When senior
management was found packing up boxes at the holidays, legends become real and
employees follow them anywhere they want to take the company.
The company also is expanding its physical infrastructure to include a
distribution facility in Nevada. This center is over 300,000 square feet and
will be highly automated, this should have the effect of lowering the cost of
product, and speeding the delivery time. The lower cost is achieved by getting
popular items direct form the source and not through distributors. The delivery
time is improved since if the product is on hand it can be immediately packed
and shipped. This is yet another example of Amazon's extensibility.
(End of Part 1 of 2) |
