Amazon Is Wal-Mart, The Next Generation

Jun.30.09 | About: Amazon.com, Inc. (AMZN)

Cowen analyst Jim Friedland Tuesday morning raised his rating on Amazon.com (NASDAQ:AMZN) to Outperform from Neutral, essentially asserting that, well, you ain’t seen nothing yet.

“We expect its share of the consumer wallet to increase materially, driven by greater penetration of non-media categories, higher frequency of orders per customer due to growing adoption of Amazon Prime and reinvestment of profits from high margin revenue streams into lower prices,” he writes in a research note.

But that’s not all.

Friendland also contends that “Amazon’s aggressive investment in search, site content, customer service, digital distribution and third party platform have resulted in a sustainable competitive advantage.”

Not least, he says the Kindle e-book reader positions the company to benefit as the book market transitions from physical to digital media.

Friedland notes that Amazon has 9.5% of the U.S. book market; he thinks they are well-positioned to gain share in other categories. He notes that the company is only 0.3% of U.S. retail sales, versus 7.7% for Wal-Mart (NYSE:WMT). “Amazon is a next-generation Wal-Mart,” he contends. “The company’s focus on lower prices and a superior shopping experience versus online and offline competitors will result in substantial share gains over time.”

AMZN Tuesday is up 92 cents, or 1.1%, to $83.95.

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