The company has not yet responded to TheStreet’s request for comment on its Kindle plans, although it did unveil the Kindle Fire in late September 2011, which may indicate a late summer-early fall launch for its successor.
“They continue to expand into additional product categories, which helps them every year,” Ken Sena, an analyst at Evercore Partners, told TheStreet. Mr. Sena has a buy rating on Amazon.
Amazon has also shown it understands the vast market opportunity offered by students. Earlier this month, for example, the company expanded its textbook rental service from Kindle-based textbooks to physical textbooks. The retailer offers students a choice of thousands of titles that can be rented for the semester.
The Seattle company also offers Amazon Student, a free membership program exclusively for college students, which provides six months of free two-day shipping on millions of items and exclusive offers via e-mail. Clearly, Amazon is keen to win students’ hearts during their college years, with a view to winning their wallets when they graduate.
History certainly points to robust top line growth for Amazon. The company’s media business, which encompasses books, DVDs and music, grew revenue 24 per cent year-over-year during the third quarter of 2011. Sales of Amazon’s electronics and other general merchandise rose 59 per cent over the same period, with the company’s overall revenue growing 44 per cent compared to the prior year’s quarter.
Amazon’s third-quarter earnings, however, came in just below Wall Street’s estimates, although this can be attributed to the company’s expansion efforts as opposed to any customer reticence. On the contrary, Amazon grew its active customers by 26 per cent during the quarter, its fastest growth since early 2004.
Overall, Amazon continues to attract plenty of positive attention from analysts. “We view Amazon.com as one of the few large-cap opportunities to have secular exposure to e-commerce, which is gaining share from off-line retailers,” explained Oppenheimer & Company analyst Jason Helfstein, in a recent note. “In addition, Amazon continues to gain share of U.S. e-commerce with its deep product selection, low-cost express delivery through its Prime program, and breakthrough success of its Kindle e-reader platform.”
As the online source for everything from bedding to tablets and laptops, investors should keep an eye on eBay during the coming months. The resurgent retailer looks set to ride the back-to-school wave, laying the foundations for a strong second half of 2012.
“I really do think that they are a big beneficiary of ‘back to school’ and, more importantly, of the holidays,” explained Think Equity analyst Ronald Josey, who has a buy rating on the stock.
The online auctioneer posted strong second-quarter results last month, boosted by its booming mobile businesses, which bodes particularly well for the coming weeks.
eBay has described mobile as a “game changer” and expects its eBay and PayPal mobile offerings to each deliver $10-billion of transaction volume in 2012, more than double 2011’s volume. “Their focus on mobile, we believe, is attracting a younger consumer, which is attractive from a longer-term perspective,” noted Think Equity’s Mr. Josey. “More and more of their business is coming from mobile.”
During the second quarter, eBay also continued the turnaround in its core Marketplaces business, which enjoyed some of its strongest growth since 2006. The numbers helped prompt Evercore Partners to raise its eBay price target. “Marketplace’s success in achievinggrowth commensurate with the industry, PayPal’s large and growing addressable market opportunity, and the overall company’s continued progress in mobile makes eBay an increasingly compelling investment proposition,” noted Evercore’s Mr. Sena, in a recent note.
Although eBay came to prominence as an online auction site, the retailer has also been aggressively growing its fixed-price business, which Think Equity’s Mr. Josey says will boost the company’s margins. During the second-quarter, eBay’s fixed price business accounted for 65 per cent of its gross merchandise volume (GMV). Excluding vehicles, fixed-price GMV grew 20 per cent year-over-year.
“It’s clearly growing faster than e-commerce,” noted eBay CEO John J. Donahoe, during the company’s second-quarter conference call.
History also provides some positive hints for investors. Last year’s third quarter was also a solid one for eBay. The San Jose, Calif.-based firm edged past analysts’ revenue estimate and met Wall Street’s profit forecast.
Like last year, the retailer also looks set to benefit from the growing popularity of online shopping. According to the National Retail Federation, just under 40 per cent of consumers will purchase at least one item online during the back-to-school season, up from just under 11 per cent in 2003.
Crucially, eBay also maintained its full-year revenue guidance when it reported its second-quarter results recently, despite the macroeconomic headwinds faced by much of the tech sector.
TheStreet Ratings has a buy rating on eBay.