AMZN - Amazon`s Customers Stick Around - 500 Beiträge pro Seite

[investor_007]

Amazon`s Customers Stick Around

By David Gardner
April 26, 2000

The Rule Breaker Portfolio lost a little bit more than the rest of the market today, dropping 1.32% in value versus The Motley Fool NOW 50`s loss of 1.17% (about in line with the S&P 500, today). The Nasdaq fared worst, losing 2.19%.

It was a day like no other day, really... and yet it was a day like all other days.

(That comment was paraphrased and cribbed from a 1985 movie called The Sure Thing, a funny John Cusack flick in which the creative writing teacher, played by Viveca Lindfors, responds to such a line in a student composition by saying, with a hint of exasperation, "You have a wonderful gift for... ambiguity.")

Ambiguity is what stock market recaps are really good at, relying as they do on phrases like "profit-taking" and "inflation worries" to explain whether the market went up or down. Sigh.

Before I get into what interested me most about the day (Amazon`s earnings reported after the bell), I want to make a special offer. A talented friend of mine named Jeff Bjorck -- a longtime Fool reader and psychologist at Fuller Theological Seminary -- recently came out with a CD of his own original piano compositions. I find it lovely, and as a Foolish patron bought 100 of them! For whom? You, if you`re a pianophile and reading this before 10 p.m. EST tonight.

If you`d like your own copy, just e-mail [e-mail] and let her know your name and address, and one Foolish thing about you. We`ll give Jeff`s CD away to the first 100 takers, and if you don`t get one we apologize because we only have 100.

Fools support Fools, and Jeff has been a Foolish online friend of mine for a few years. Fools support non-Fools, as well, of course -- there are more of them!

OK, Amazon.com (Nasdaq: AMZN) reported a first-quarter operating loss of 35 cents a share, compared with Wall Street estimates of --

Hey! Do you really care about that? If so, I`d encourage you to begin to try to get away from the Wall Street estimates, as have I. They systematically understate expected results, coming as they do almost directly from the mouths of managers. At the same time, I do not find "whisper numbers" to be particularly interesting or reliable either. Rather than get hung up on the very short term ("Did they beat estimates?" and "How will the stock do tomorrow?"), I encourage you to ask yourself how this business or any other DID, and the implications of that quarter`s performance for the longer term. That`s thinking like an owner, not a speculator.

So anyway, the Wall Street consensus according to our Fool Data page for Amazon was a loss of 36 cents per share. So they beat estimates! What a surprise!

More importantly, sales rose 95% from last year`s calendar first quarter to $574 million. Total customer accounts were up over 20 million. The most important metric (for me) remains orders from repeat customers, and these represented 76% of all orders in the period.

Does that sound impressive? Well, let`s think about that, rather than just mouthing numbers.

What if that figure were 0%? Is that good or bad?

Well, it would show that the tremendous growth (since revenues were up 95% to $574 million) came from millions of people who had never used Amazon.com before, and who used it just once, each. It would also mean that ALL of Amazon`s previous customers (who generated over $200 million in sales in the comparable quarter last year) had ended their relationship with Amazon. Incredible customer growth (about 20 million new ones), then, but incredible customer churn.

What do you make of that? I would call it bad. It would undermine my belief in their "customercentrism" (CEO Bezos` word). I would think: "These guys can market, but they can`t serve!"

Continuing to play with numbers, what if the repeat-order share of revenues were 100%? The virtual opposite. So if it`s the opposite of something bad, would that make it good?

Well, 100% would mean that Amazon had succeeded mightily in getting their existing customer base to buy more, more, more -- 95% more than last year. That`s impressive. At the same time, we would have to wonder why Amazon had been unable to lure any new customers. We would be very dubious about their longer-term sustainable growth.

As it turns out, the customer growth from last quarter was up 3.1 million accounts to 20 million. And 76% of total sales came from repeat purchasers. Is this (76%) the "right" number? It`s about as good as any other. The company saw moderate customer growth and strong sales growth.

Overall, the report is almost exactly what you`d expect. With each passing quarter, Amazon continues to solidify itself as a well-capitalized long-term player in electronic commerce. At this point, it is in a class by itself, considering its market share and brand presence compared to so many (too many) of the world`s other "dot-coms." Of course, with the growth comes less potential for massive future appreciation in the stock price -- sort of a natural consequence of larger and larger numbers. As someone who`s held the stock for three years now, I continue to hold it contentedly with a belief that Bezos & Co. will execute according to plan. I myself think I spent more money purchasing stuff on Amazon.com in the past quarter than any other, and probably even more the next. Not that this should mean much to you. But I do generally let my investment dollars flow in the same direction as my consumer dollars.

For more on Amazon, take a stroll through our Amazon.com discussion board, and check out the free Fool Research report.

Finally, speaking of reports, did you know you can now create and write your own original research and ideas about investing, business, and technology, and offer them for sale via our newest Motley Fool enterprise? Check out Soapbox! It`s at www.soapbox.com. We`re accepting applications from all interested authors now.

Fool on and Soap up!

David Gardner

http://www.fool.com/portfolios/rulebreaker/2000/rulebreaker0…

[investor_007]

The Bull Case for Amazon
By James J. Cramer

4/27/00 2:33 PM ET



Click here for the latest from James J. Cramer.


There are a lotta smart people emailing me saying Amazon (AMZN:Nasdaq - news - boards) in the end has to go out of business, that it just doesn`t make enough money on what it sells.

I am not long Amazon. But let me give you the big bull case. It`s the "Last Man Standing" standing defense, and, from where I sit, Amazon might have it dead right.

It goes like this: Amazon has a war chest. One thing is for certain; the company has had little problem replenishing that war chest. In the meantime it sells many goods at ultra-low prices, betting that it can hook you. I know I am hooked. I buy more books now and go to the library less than any other time in my life.

There were initially many Amazon-esque pretenders with frictionless models out there. They are almost all at their 52-week low. They are pathetic stinking losers. Most of them have no hope and go up only on periodic short squeezes. Most investors feel totally fleeced by the sector. I couldn`t bring public a dot-com competitor of Amazon now if I offered a $3 selling concession per share -- and that`s huge. I wouldn`t buy one of these even if it sold at its cash position, which some of them do.

So what happens next?

Simple: They all go out of business and Amazon takes its hooked populace of eager users and it raises the price. It can do that because it is the last man standing!

That`s the bull case. Right now it looks so unassailable that I almost bought 25,000! But Jeff "Go Buy Yahoo! (YHOO:Nasdaq - news - boards) or AOL (AOL:NYSE - news - boards) Instead" Berkowitz prevailed, and we did his moniker as a way to placate me.

Now you know what I know. Good luck with it.

--------------------------------------------------------------------------------

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo! and AOL. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer`s writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at [e-mail].

[investor_007]

Amazon`s Quarterly Report Card

By Paul Larson (TMF Parlay)
April 27, 2000

Some weeks we really don`t have much substantive news to talk about in this space. That isn`t the case this week. Between Monday and Wednesday we had first quarter earnings announcements from Amgen (Nasdaq: AMGN) , eBay (Nasdaq: EBAY) , Celera (Nasdaq: CRA) , and Amazon.com (Nasdaq: AMZN) . Considering the Rule Breaker owns only seven companies, that means we`ve had over half of our companies report in a three day space!

Today, I`ll go ahead and grade the company representing this portfolio`s second-largest position -- Amazon. David touched a bit on the earnings yesterday, and I`ll give my own two cents as the Fool covering the company for the Fool`s Research Area. (The original Amazon research report is available for free!) On to grading some of the key metrics we`re looking at closely...

1) Sales Growth: B

It should come as little surprise that Amazon reported sequentially lower sales than the seasonally juiced fourth quarter when they reported an impressive $676 million in quarterly sales. Most analysts were expecting sales between $525 and $550 million this quarter, yet I was expecting $600 million. The company split the difference and reported $574 million. Needless to say, this was significantly higher than the same quarter last year where Amazon had far fewer "stores" and only reported sales of $294 million.

Yes, I was anticipating the company to report slightly more revenue than they did, but it was by no means a large miss. After all, predicting what Amazon will do is not exactly a trivial assignment.

2) Margin Improvement: B+

The company was able to improve margins more than we thought they would be able to. Last quarter, the company reported gross margins (gross profit divided by sales) of 13%, and we were anticipating a rebound to 20%. The company reported actual gross margins of 22.3%, and the company managed to generate $128 million in gross profit versus our estimate of $120 million. Not bad, especially considering the company slightly undershot our Foolish sales estimate.

Looking further down the income statement, the company reported an adjusted net margin of negative 17.3%. This compares to our Foolish estimates of negative 20.7% and negative 27.3% in the fourth quarter. Of course, keep in mind these are all "adjusted" margins where we back out the effects of intangibles, stock-based compensation, merger, acquisition and investment-related costs. Either way, the company managed to improve both its gross and net margins more than we anticipated.

We are keeping a close eye on margins for good reason. If the company is to indeed attain profitability down the road, its sales growth must be accompanied by reduced cost per sale. The most tangible way to make sure the company is achieving efficiency is by looking at margins. It`s hard to give an "A" grade when a company has negative net margins, but the direction in which Amazon`s margins are headed is something we certainly approve of.

3) Outlook for the Future: A

Listening to the post-earnings conference call, Amazon`s executives repeatedly talked about the "drive to profitability." At this stage in the company`s life, this is the type of confident talk that we like to hear.

The skinny on what they said to expect in the near future includes:


Strong year-over-year sales growth. (Duh.)

Continued gross margin improvement throughout the year.

Fulfillment (distribution and shipping) expenses to drop into the low teens as a percentage of sales. (Last quarter they were 17.3% of sales.)

Operating losses to drop to the single digits as a percentage of sales. (Last quarter they were also 17.3% of sales.)

Increased inventory efficiency through the year.

Most importantly, Amazon expects operating cash flow to be positive for the remainder of the year. They also expect this cash flow to exceed their capital expenditures. In other words, the company`s cash burn is rapidly decreasing and actually expected to turn the other way by the end of the year.
These are all incredibly positive things if achieved, and we`re especially excited about the potential for cash to start flowing into instead of out of the company. Once the cash starts flowing in, a black bottom line using Generally Accepted Accounting Principals (GAAP) won`t be far behind. Either way, we view the forward guidance about the company`s direction to be very positive.

Needs Improvement: Partner`s Health

While it wasn`t really addressed in yesterday`s earnings release or conference call, without a doubt the most troubling thing with Amazon today is the failing health of many of its investees in the so-called "Amazon Commerce Network." What were once profitable investments in other e-commerce companies have rapidly turned to very unprofitable ones in a short amount of time. Pull up a quote on Drugstore.com (Nasdaq: DSCM) , Sotheby`s (NYSE: BID) , or NextCard (Nasdaq: NXCD) to get an idea what I`m talking about. (Drugstore.com made the Fool News this week.) We`ll be keeping a close eye on this situation.

Overall Grade: B+

Even though many other e-tailers are starting to run into serious cash flow problems, Amazon continues to stand head-and-shoulders above its peers. The company has just over $1 billion of cash in its war chest. This should be more than enough to ward off its competitors, especially since Wall Street is extremely reticent to fund upstart online retailers these days.

The company is not profitable today, but it appears that positive earnings are something to perhaps expect in 2001. Being nowhere near mature just yet, direction is more important than location. We like the direction, and we also love Amazon`s positioning against its competitors. As customers as well as investors, Amazon continues to be one of our Rule Breaker favorites.

The bottom line with this quarter`s earnings is that not much has changed with the Amazon story over the first quarter. If you didn`t like Amazon three months ago, nothing transpired that is likely to change your mind. Likewise, if you liked Amazon last January, there wasn`t much revealed that should have you bolting for the exits. Being Fools, we`re going to continue to optimistically hold our shares while watching the company grow and distance itself from its peers.

Of course, this is all just one Fool`s take, and there are lots of other opinions out there, including numerous decidedly bearish ones on the Amazon discussion board. What grade would you give Amazon this quarter? Post away!

[eule100]

Habe kein Bock, um 24.00 Uhr mich mit drei Threads in English rumzuschlagen. Ansonsten schöne Visionen und Aussichten !?

[investor_007]

A Fool for Amazon
By James J. Cramer

6/26/00 7:10 AM ET



Amazon`s (AMZN:Nasdaq - news - boards) shocking decline last week called into question the whole notion of Net investing.

Despite the decline of dozens of also-rans and me-toos in the dot-com world, there was always something about Amazon that placed it above the fray. I know for a long time we were afraid to short the darn thing. We always knew that some analyst somewhere would come out and slap a super-de-dooper strong buy on it and we would be buried with all of the other shorts in the name. In short, Amazon was a cult.

That era ended last week in a blaze of cyanide-laced Kool-Aid reports from Lehman Brothers. Beginning last week, I thought you could short Amazon with impunity. The thing was just rolling over, beached, whale-like. Everybody who had been crushed by this thing on the short side came out to the beach to give it a swift kick to the head. Including us. (We covered, but I would love to see this sucker rally again to put more out.)

Let`s face it, Amazon was and is still an overly worshipped stock. I cruised through The Motley Fool this weekend to see what that site was saying about this icon, and, sure enough, there was genuine disbelief, as in the "Wall Street is such a bunch of stupid fools" variety. Wow, that`s a played out rap, guys. TMF, you have been at the game long enough that, like it or not, you are now us. You even sound like the Street with your research reports and your dual recommended lists -- including one that is down a lot, the 20% drop in the rule-breaker thing, caused in part by an Amazon weighting. Ouch! Nasty.

The Motley Fool`s defenses of Amazon seem painful, almost reminiscent of pre-$400-price-target Henry Blodget. You know what I mean -- before Blodget blossomed into a really good rigorous analyst who tells the truth more than almost anyone else in the group. At that time, TMF said things like, "Nothing`s changed! Lighten up. Have some fun with your losses. They arenýt losses till they are taken! A fool and his money!"

To me, last week, Amazon just became another retailer overburdened with debt at the time of a slowdown. Over the weekend, I was emailing a living, breathing venture capitalist, and he was saying that there was a price at which Amazon had to be bought.

I shot back that, with that capital structure, there really isn`t a price, because there will be massive dilution from the converts and a possible restructuring ahead. At this point, any more convertible debt would be swallowed up by vultures who would short the common stock to oblivion, pick up the yield from the bonds and laugh all the way to Amazon`s Chapter 11 status. ("First dibs on that cool piece of real estate in Seattle," said the convertible arb!)

The VC spoke of the great brand that Amazon has built. I talked about selling bonds in the Macyýs LBO back in the `80s. Every piece of paper I sold wilted under a slowdown and then got crushed in bankruptcy. And Macy`s had a fabulous brand name. No brand-name retailer with a lot of debt can handle a real slowdown without tremendous pain. Amazon will be no different.

To me, the comeuppance of Amazon is good news. Cults belong in the hills of Ukiah and the jungles of Guyana. When they come to Wall Street they always leave behind a stream of bodies that I`d rather not trip over on the way to the office.

Let`s get back to buying stocks where the companies don`t mock the notion of profit and the business, not the stock, gets managed by the top brass. Let`s cool it with the "nothing`s-changed" rap. Something`s changed. You can no longer lose money forever and expect fools to foot the bill.