This Company Continues to Kindle Its Fire
Naomi is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
According to reports, Amazon (NASDAQ: AMZN) experienced a tremendous Black Friday ahead of the seasonal drive for sales of its top products. Amongst the performance indicators, sales of its trademark Kindle Fire were said to have tripled, making it the most popular day for Kindle Fire sales in the company’s history. All this adds to the expectation that Amazon will very likely push through its all-time high of $264. Traders and investors anticipate these strong sales figures achieved in the week running up to Black Friday will continue to the end of the year.
Other retailers are all set for a very busy holiday period in the US, including eBay (NASDAQ: EBAY). The reason for this is the increase in sellers who are looking to make profits on the hard-to-find bargains they managed to find on Black Friday. For eBay, scarcity and demand for hot products created around the festive period really does boost both its popularity and sales figures.
Unlike eBay, Amazon is richly valued, and the prospects of the company moving consistently higher have been challenged by some skeptics. Some investors see Amazon’s current valuation as unsustainable, given that its share price has risen over 40% since January 2011 without the growth figures to support this move. The company has consistently commanded a price-to-earnings ratio of over 100; with investors seemingly willing to pay this given the company’s history of phenomenal growth and future prospects. Even Amazon’s closest rivals, such as Apple (NASDAQ: AAPL), whose iPad competes directly with Amazon’s Kindle reader, only operate on a PE ratio of 13-16.
The view that Apple may currently be a better investment than Amazon is supported by huge global demand for its products. Apple’s market cap is roughly $554.41 billion. However, the technology darling has recently experienced a 20% decline in its share price to hit a 6-month low, and currently boasts a PE ratio around 13.34. Its Q3 report for 2012, in comparison to the previous year's Q3 showed revenue growth of 27.22% with an EPS YoY growth of 22.66% in the same quarter. Apple bulls point to the fact that it has blockbuster products which will almost certainly become the most-wanted Christmas gifts and help re-establish its value, although this does not necessarily mean they will be the most-purchased.
One of the most interesting factors in the Amazon success story, as opposed to Apple, in their Kindle sales is that it essentially promotes affordability. While admitting it does not make large profits from the device itself, its online book sales through the device have boosted revenues and the potential to continue to dominate the online retail sector will always lure investors in. It is worth noting that, as the largest online retailer, Amazon commands only around 7% of global e-commerce that certainly leaves plenty of room for future growth.
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