This Online Retailer Could Jump 15% By 2014
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For technology investors, it may seem that the world of companies - and their array of different offerings from which to choose - is constantly expanding. One example of an ever-growing company is Amazon (NASDAQ: AMZN). While Amazon may have started out as the world's largest online bookstore, today the company is much, much more - all contributing to its market cap of nearly $115 billion. In this article, I will discuss why I think that Amazon is a good addition to investors' portfolios for both short- and long-term growth.
So far this year Amazon's share price is up over 44%, and is presently trading near its 52-week high. Although earnings per share is below 1, the P/E ratio currently stands at close to 310. And, with sales over the past 12 months of over $54 billion, Amazon brought in roughly $377 million in income.
In addition to offering books, music, and other items on a distribution basis, Amazon now also offers programs that allow independent sellers to sell their own products via the company's websites, as well as through their own branded sites. Over the past few years, Amazon has also expanded into providing web services that allow developers to access the technology infrastructure in order to enable various types of virtual businesses. These increased options have all led to Amazon's massive growth over the past several years.
One of the company's most recent - and popular - products is the Kindle e-reader. Amazon's new Kindle Fire HD tablets have been heavily advertised, and seem to be following in the original Fire's footsteps of selling out within one year of introduction. If this is the case, investors will likely be further rewarded with an increase in share value.
Other Giants in the Field
One really can't think technology without also thinking about Google (NASDAQ: GOOG). With a market cap in excess of $246 billion, this company is so well-known that its name is both a noun and a verb. Google’s stock has performed well of late, with earnings per share of just under $34 and a P/E ratio of slightly above 22. Yet while the company remains strong, share price is only expected to rise by about 2% over the next 12 month period - so investors may want to pass on this one, at least for the time being.
With the introduction of Apple's (NASDAQ: AAPL) new iPhone 5, this company's shares have seen a great deal of action recently - even hitting an all-time high at one point. However, analysts that follow Apple have mixed views regarding the stock.
While many are reaffirming their Buy rating, others appear to be disappointed with the lackluster sales of the iPhone 5 as well as the failure of its Maps application. It has also been pointed out that Apple's shares may be losing ground lately due in large part to a supply chain issue, as well as to a poorly timed introduction of the new iPhone as it went head-to-head with Samsung's highly-promoted Galaxy 4S tablet.
In any case, the shares of this tech giant with a market cap in excess of $625 billion are expected to rise by nearly 16% over the next 12 months, making them a fairly attractive addition to investors' portfolios.
Certainly, one of the other big players in the tech arena is Netflix (NASDAQ: NFLX). The company has been described as "eating and sleeping video," with its substantial offerings of movies and television shows, as well as DVDs and Blu-ray discs for rental. While Netflix’s market cap of just over $3 billion pales in comparison to Amazon's, the two are vying for many of the same customers.
Recently, Reed Hastings, the CEO of Netflix, noted that Amazon appears to be his company's biggest competitor. He also went on to state that Amazon may be offering too many options to its customers - especially in light of Amazon's Prime offering for video - and that, "It’s kind of a confusing mess."
Regardless of the war of words, Netflix can definitely also offer investors a great opportunity for growth. With earnings per share of $1.76 and a P/E ratio of 31, Netflix stock is anticipated to rise over the next 12 months by roughly 36%.
Another much smaller entity in the ring is Barnes & Noble (NYSE: BKS). With sales of over $7 billion in the past 12 months, the company’s income still declined to the tune of a $69 million loss, giving it a negative net profit margin.
Not to be outdone by the "big guys," Barnes & Noble introduced its own e-reader, the Nook, several years ago - and the company has continuously made improvements to the device. However, two new tablets that the company has in development are likely to face stiff competition from both Amazon and Apple. To make matters worse, with the upcoming release of Microsoft's Windows 8, Barnes & Noble's tablets will be left further in the dust, as other "smarter" tablets will be able to run on the Windows platform.
One option that has been noted as a possibility for improving Barnes & Noble's struggle is to join forces with Sony (SNE). As both companies have recently experienced double digit declines - while the S&P 500 has gained over 60% within the past decade - it could make sense to consider a merger and combine the two companies' competitive position. In the meantime, investors may want to steer clear of both of these companies.
The Bottom Line
While some may feel that Amazon is spreading itself too thinly, I think that the company's offerings complement each other nicely - and apparently so do many analysts, as the majority rate the company as either a Buy or a Strong Buy. The estimated increase in share price over the next 12 months is roughly 8%; however, I believe this stock will gain 10% to 15% over the next 12 months. The long-term prospects for this company will serve its investors well.
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StockCroc1 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, Google, and Netflix. Motley Fool newsletter services recommend Amazon.com, Apple, Google, 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.