Amazon the Glorious Warrior
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
First off, I have to admit I am an omnivorous reader and read almost anything including cereal boxes. That said, Amazon has changed the way I read forever and maybe not in a good way for Amazon. I used to love going to the library and still do but when I can get a book in my hands within seconds with its 'Whisper Sync technology' and have it forever in a little device that weighs less than a book, well, you sold me. But then, I found you can get all kinds of free books, different ones every day. They are rarely bestsellers, but the selection is not bad. Now my county library has seen the light and Amazon is listing some titles on my county catalogue. Still, it's easier to actually download them onto the Kindle and then read them on an iPad. And maybe that translates to an advantage for the Barnes & Noble (NYSE: BKS) Nook, with Glowlight and COLOR.
Now, analysts were bearish on Amazon (NASDAQ: AMZN) before their latest earnings release, saying the FIRE was just a loss leader, don't buy..yada, yada, yada. And then AMZN beat and amazed them all running from the 180's to the 230's. Maybe it is the books that are really the loss leader and are just a public service for self published authors. Amazon is fighting competitors on at least four fronts. There are the battles of the tablets with Apple (NASDAQ: AAPL), streaming with Netflix (NASDAQ: NFLX), online sales with eBay (NASDAQ: EBAY) and e-readers with Barnes & Noble.
There is certainly risk with a PE of 179, (yikes!) almost as high as the share price was before earnings. Apple and eBay have PE's in the teens and even Netflix has a much lower PE. The lone exception is Barnes&Noble which is still losing money. Amazon is generally considered a momentum name as well and moves in correlation with risk off-on traders. It used to be one of Jim Cramer's FADSCAN names. Of course, my kids would rather have the new iPad than the FIRE, but I bet a lot of consumers compromised and got Fires as gifts for dads and grads just as I would. And when it comes time for them to go back to college you know I'll be checking for used textbooks on Amazon.
Is Amazon more like a public utility offering their services to the public i.e, cost comparison to retail buyers (how Best Buy the mighty has fallen), a cultural warehouse, or is it a business? It has no yield like a utility and, while not the battleground stock like Netflix, it has its detractors. I admire their ecosystem and have read that many serious eBay sellers are abandoning eBay instead turning to the Amazon warehouse service and paying a little extra for that convenience. I'm sure every agoraphobic in the world thanks their lucky stars for Amazon. As much as I love and appreciate their services and gadgets I think Amazon may be stretched a little thin until they win the war with at least one of these four competitors. And now I hear of a Google tablet. Can't anyone give Amazon a break?
Before I join up on this stock I would need to see a major victory over Netflix, eBay or Barnes & Noble, (the most likely being Barnes&Noble). Then I'd feel comfortable getting behind the Amazon army.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Netflix. Motley Fool newsletter services recommend Amazon.com, Apple, eBay, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.