[ncolug] new OS
- From: larry <larry@xxxxxxxxxxxx>
- To: ncolug@xxxxxxxxxxxxx
- Date: Thu, 26 Apr 2007 20:39:23 -0400
Amazon shares jumped nearly 27% on Wednesday, a day after the company announced it more than doubled its first quarter profit to 26 cents a share, beating analysts views by 11 cents. Sales also surged by double-digits as Amazon pulled in stronger-than-expected Web site sales.
Investors are betting that its just the beginning as Amazon spends millions upgrading the digital hardware and software that backs up its e-tailing platform.
"In our opinion, (Amazon founder and CEO) Jeff Bezos and Amazon are ultimately trying to create the operating system of the Internet," wrote Deutsche Bank analyst Jeetil Patel in a note to investors about a week before the earnings report.
Patel upgraded his rating on Amazon's stock to buy from hold and raised his one-year target price for Amazon shares to 50 from 37.
The move helped propel Amazon shares to a one-year high of 45.20 on April 16, more than a week before the current run up.
Amazon also is launching new services designed to draw more consumers to its e-commerce site.
One recent example is Amazon Prime, a service that -- for a flat yearly fee of $79 -- provides unlimited two-day express shipping free and overnight shipping for $3.99.
Prime TimeBezos said Tuesday that Prime played a large role in Amazon's first-quarter sales.
"Prime continues to grow as a percentage of overall units shipped, and we're very grateful to our Amazon Prime members," Bezos said in a statement.
Michael Souers, an equity analyst for Standard & Poor's says Amazon will do better in managing costs over the next three quarters. He predicts Amazon's operating margins will increase slightly this year, with revenue growth potential very strong this year and over the next several years.
"Overall, we really like (Amazon's) long-term potential," Souers said. "We think they have a very customer-friendly Web site, and their fast shipping, and breadth and depth of products really helps drive customer loyalty."
Souers predicts Amazon will earn 73 cents a share in 2007 and $1 a share in 2008.
Some analysts, however, are less bullish."(These investments) are the right thing for Amazon to do, but it will take time for them to make a dent in their revenue and margins," said Global Growth Capital analyst Martin Pyykkonen.
Piper Jaffray equity analyst Aaron Kessler says Amazon's sales in the first quarter were helped along by favorable foreign exchange rates in Europe, not just strong Web site sales.
Overvalued?Kessler says Amazon's executing well on its business model. But he says the stock is overvalued at current levels. He downgraded Amazon's stock on Monday to underperform from market perform on valuation concerns.
At the same time, Amazon's gross profit margins will continue to face pressure from product discounting, said JPMorgan analyst Imran Khan in a first-quarter preview issued before Tuesday's earnings.
Khan says the squeeze is coming from customer perks, including the Amazon Prime program.
But Nielsen/NetRatings analyst Heather Dougherty says shipping discounts aren't the only thing that's energizing Amazon's sales.
She notes Amazon last year acquired Shopbop, an online seller of luxury fashions and accessories for women.
The stand-alone Web site, separate from Amazon.com, sells fashions from top designers such as Marc Jacobs.
Dougherty says Amazon's thrust into upscale fashions shows it's luring wealthier and not just mass-market shoppers. And she says the effort will pay off by upping sales.
"The variety of products they sell and the other retailers they offer continues to make them a consistent stop for online shopping," Dougherty said.
--"Running Linux for the first time is like visiting another planet, where people are named after power tools, and everyone speaks in abbreviations."
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