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Tags: Amazon | Google | Apple | AMZN

Amazon Makes Huge Strides to Compete with Google, Apple

By    |   Saturday, 16 June 2012 12:27 PM EDT

Amazon (AMZN) has made huge strides since its early founding as an online bookstore, spreading its reach globally and into dozens of retail categories and, lately, into consumer and business technology to compete directly with Google (GOOG) and Apple (AAPL). Despite its high price-to-earnings ratio, analysts love the stock and expect growth to steadily increase.

Amazon is a global Internet retailer which operates with four primary customer sets: consumers, sellers, enterprises, and content creators. In addition, the company generates revenue through marketing and promotional services, such as online advertising and co-branded credit card agreements.

Amazon reports in two segments: North America and International. It serves consumers through retail websites that focus on selection, price, and convenience. The company sells directly and fulfills for third parties across dozens of product categories. It also manufactures and sells Kindle book reader and Internet access devices.

Sellers can use Amazon websites to fulfill orders, in which Amazon earns fixed fees, revenue share fees, per-unit activity fees, or some combination thereof. The company also serves enterprises of all sizes through Amazon Web Services, which provides access to technology infrastructure that enables virtually any type of business.

The company also has Kindle Direct Publishing, an online platform that lets independent authors and publishers choose a 70 percent royalty option and make their books available in the Kindle Store. Amazon’s own publishing arm, Amazon Publishing, offers authors another outlet to publish their books. The company similarly serves authors, musicians, filmmakers and other content creators through CreateSpace, which provides on-demand publishing and manufacturing for independent content creators, publishers, film studios, and music labels.

The company had approximately 56,200 full-time and part-time employees in 2011.

“For Q2 2012, we expect net sales of between $11.9 billion and $13.3 billion or growth of between 20 percent and 34 percent. This guidance anticipates approximately 240 basis points of unfavorable impact from foreign exchange,” Amazon CFO Tom Szkutak said in a recent earnings call.

Amazon has a market cap of $98.37 billion in a sector, Internet and catalog retail, where the average company size is $2.54 billion. Its trailing 12-month P/E ratio is 180.45 and its five-year projected price-to-earnings-growth (PEG) ratio is 5.53, compared to 3.89 for the sector.

Its projected earnings per share growth for the coming year is 109.76 percent, compared to a sector average of 133.34 percent.

Wall Street bullish

Wall Street is bullish on Amazon’s stock, with buy or outperform calls in from Susquehanna Financial, RBC Capital Markets, Merrill Lynch, Credit Suisse, Piper Jaffray, Citigroup Investment Research, SunTrust Robinson Humphrey, Deutsche Bank, Morgan, Keegan & Company, Caris & Company, Jefferies, JP Morgan, Stifel Nicolaus, Goldman Sachs, Oppenheimer & Company, and B.P. Bernstein.

“AMZN continues to demonstrate the strength and worldwide potential of its business model, in our view. Continued investments in long-term growth opportunities such as Amazon Web Services, hardware such as the Kindle and Kindle Fire and increased digital content should provide new sources of revenue over the next few years,” S&P analysts wrote in late April.

“Long term, we expect AMZN's initiatives to result in continued strong sales results and significant margin expansion, as it leverages its leading brand name and position as an Internet retailer.”

Amazon next reports on July 26.

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Saturday, 16 June 2012 12:27 PM
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