Amazon's Holiday Season Results Still Inconclusive

I was waiting to see whether Amazon (AMZN) put out a press release on its holiday season this year to confirm my thesis that the company is taking shares from both online and offline competitors. So this news is very confirming – see my prior write-up here. But there are a few observations worth noting that may not be all that positive:

1. The busiest day of the year was pushed back to Dec. 15th from Dec. 10th in 2007, and Dec. 11th in 2006. It could be that customers were apprehensive about making purchases this year, and in that case, did not make purchases in the preceding days of the month, waiting until they ascertained their comfort level this holiday season. That would be a negative. However, it could also mean that customers became comfortable with shipping times and continued to shop until that date. That would be a positive. Or the shift in the peak date could just reflect the fact that there were 5 fewer shopping days this holiday season.
2. Units sold on the busiest day of the year were 6.3 million units, up 17%. The growth rate was cut in half from 35% in 2009, so on the surface the deceleration looks like a clear negative. But going back in history, there hasn’t been a strong correlation between revenue growth for the entire quarter and units sold on the peak day –as there shouldn’t.

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But I do note that Street estimates are calling for 4Q revenue growth of 16% in 4Q. Amazon did note on the 3Q08 call that it saw a pull back in purchases for higher priced items. Thus, it will depend on the mix of the units sold that will determine whether Amazon meets that revenue estimate.

Overall, no clear conclusion can be made about this news. The stock was up about 5% initially on the headline news, I suppose because it reassured investors that the business hasn’t stalled. I am still holding on to my thesis that the stock can appreciate by 20% in 2009.

Comments

[Louie Junior:]

My take -- The "news" release was subjective and meaningless. You fail to consider that five fewer shopping days, 27 vs 32, or 16% fewer than in 2007's holiday season would naturally generate more sales per day.

The fact that Amazon's "busiest day" unit sales were only up 17% in a compressed season is bearish -- not inconclusive!

2008 Dec 28 09:34 AM

[ChicagoNetTech:]

You also fail to consider that people like me spend 80% less for Christmas spending this year and did most of our shopping on Amazon back in August and September - when there were some very good deals that nearly matched the deals to be found in November and December. We also bought more locally - at craft shows - and completely skipped the traditional brick and mortar stores this year.

Everyone has to become accustomed to the fact that there is significantly less money to be spent now and the retailers will feel it in this "season."

2008 Dec 28 03:29 PM

[User 327162:]

AMZN is a strong company... However; I do dislike the clarity of there strength in sales... I am a shareholder of the company and also a Amazon shopper/user and I do think it is a phenomenal site... I also think it will be a strong stock in 2009 because people will look for bargains and many are to be found in E-Tail... Also, as strange as this sounds... AMZN has the Kindle... I know it is only one product however it is on a 13 week back order (11-13 week)... Oprah aired it on her show and sales went haywire. My house currently owns too and I believe it is a revolutionary way of reading... (Quite expensive though) I think that with the sales of this product and typical sales that they do, they should have a better quarter than last... Hence I bought into the stock... I am hoping that the growth will move the stock... We shall see...

2008 Dec 28 10:50 PM