12 Reasons for Amazon.com to Rise Substantially This Year

If you have been a long time reader of my articles, you will know that I don't make specific stock recommendations, but I do come up with stock ideas worth further investigation.

In addition, you may notice that when I cover various sectors or industries, I often disclose that I own a particular stock in that group. The reason this occurs is that I have enough stocks in my trading account to make Jim Cramer speechless; I had 69 different stocks by last count [the reason I have so many is a topic for another article].

Therefore, I am always looking to write about either stocks that I don't own or industries and sectors that I don't own stocks in, so that it doesn't look like I'm tooting my own horn, or my own stock, as it were. Therefore I was quite happy to discover a stock that looks very favorable, that I don't own, and that is - Amazon.com Inc. (AMZN). Here are some positive bullet points about Amazon:

1. Quarterly revenue growth year over year was 33.9%
2. Return on equity is 56.13%
3. Stock has a reasonable price sales ratio of 1.5.
4. The stock, which closed at 38.10, is within a couple points of its three month low.
5. The company just began their video download-to-TV service in conjunction with TiVo Inc. (TIVO) [Disclosure: I do own some TIVO which I have had for several years. I just can't seem to get away from my stock holdings].
SIDENOTE: Is there a merger in the works between Amazon and TiVo? I checked the headlines for Amazon for the last two days and out of the 20 headlines, TiVo was listed 8 times in the headline, and Amazon was listed once in the headline.
6. Amazon's Unbox software is Vista compatible.
7. Analysts' opinions are 11 sells versus 6 buys, the worst ratio it's had in the last three months. Out of favor so maybe a contrarian buy now?
8. Gross annual profit up 20.4% over the prior year.
9. Interest expense has been dropping significantly over the last three years, down 15% in '06 from '05.
10. Cash and current assets are increasing.
11. Long term debt is decreasing.
12. International sales have increased 28% in '06 versus '05.

Comments

[Linda Nelson:]

I think your advise on Amazon is right on, but not just because of the relationship with Tivo. Unbox is the beginning of the VOD revolution in the way that people will get their movies. This service is so easy to use. I just plug my ZEN (a wonderful little handheld video device made by Creative) into my PC, click on Unbox icon, pick a movie and with one click and a little time (less than forty minutes for a feature), I have the movie I want to watch. This device acts like a DVR (TiVo is a DVR), but it's tiny enough for me to take with me anywhere. I can watch content on the go and one of the great features is that when I am at home, I can plug it into my TV and watch in DVD quality on the "big screen". I can't be the only person catching on to this. I have a particular interest in being ahead of the curve, because I am a film producer and want to see my independent films find new audiences. This type of delivery system could well replace DVDs, going to the video store (which by the way, only needs to be a few burning kiosks) and rent-by-mail services like Netflix. Unbox, combined with ZEN or any other compatible handheld that works like it, is the first service that truly lets you watch what you want, where you want. I'm really excited about it and I'm sure others will be.

2007 Mar 10 11:07 AM

[Stockerblog:]

This is a great observation and is what I call a Green Flag. A green flag is when you have an extremely positive personal interaction with a publicly traded compnay's product or service. [Red flags are the opposite.] I've discovered a couple other green flags with Amazon also.

2007 Mar 13 12:19 PM

[Michael Eis...:]

I have been pretty bearish on Amazon because I think it is fundamentally a retailer with an outsized multiple but I just saw two start ups making heavy use of Amazon's S3 and web services infrastrcuture and I am beginning to rethink my point of view on the company

2007 Mar 12 06:13 AM

[nite0859:]

Amazon is a wonderful company that provides a wonderful service. Like everything else, buy low sell high.

2007 May 14 01:40 AM