Today's WSJ featured an editorial that tipped its hat to Tarheel basketball, yet criticized (my home State of) North Carolina's pending legislation that would impose an onerous set of tax compliance measures upon online retailers like Amazon.com (AMZN). The article also reports that Amazon has cancelled its affiliate relationships within North Carolina - an act of defiance against the State and its legislature. We're admittedly sad that NC has been made to look foolish by one of the few companies that can boast earnings growth in the current recession. However, with the recent passing of Michael Jackson, the reality is that Amazon likely can afford to lose its NC affiliate revenue.
Amazon is likely to have an exceptionally strong quarter, based largely on the fact that copies of virtually every Michael Jackson album are selling at a torrid pace. The French website Net-Actuality reported today that Michael Jackson's albums are currently holding the top 15 bestseller slots on both the French and American language Amazon sites. After visiting the online retailer's bestseller page, it appears that prior to two days ago, none of Jackson's albums were even in the top 100. It is highly unlikely that these albums were catapulted to the top positions by shoppers who had already planned on purchasing something from Amazon, and merely chose to buy a MJ album in the place of another item. Rather, we would argue that the lion's share of those purchasing a Jackson album through Amazon represent new traffic to the site.
According to Alexa.com, Amazon yesterday attracted 2.23% of global Internet users, compared to a 3-month average of 2.043% of global users. When you consider that there are an estimated 1.6B global Internet users, this relatively small change in percentage terms translates into a sizable traffic surge. Although the volume of MJ's album sales will ultimately decline from the recent peak, they will likely stabilize at a higher level than before the tragic passing.
Regardless, the cumulative impact should translate into a sizable boost to Amazon's current quarter revenue and income. Investors shouldn't forget that "Thriller" is the best-selling album of all time, and that even in an era of anemic album sales, Michael Jackson clearly maintains the ability to excite consumers. While AMZN is an expensive stock relative to earnings, investors who think that the market is underestimating the impact of the current quarter's album sales may be wise to initiate a long position.
Disclosure: No position in AMZN
InfoNgen was used to research the content of this article.