Wednesday, January 26, 2011

Earnings Preview: To Report 4Q Earnings After Bell on Thursday

Bloomberg: "SAN FRANCISCO (AP) — Online retailer Inc. is set to report its fourth-quarter results on Thursday after the closing bell. WHAT TO WATCH FOR: Investors will be looking for strong growth in Amazon's two biggest businesses, which are electronics and other general merchandise and books, CDs, DVDs and other media. As usual, investors will also be alert for any concrete details on sales of Amazon's Kindle e-reader." Here's what I expect: Of course, we won't get any hard numbers re: Kindle installed base. Count on it. Amazon will show significant revenue growth, but also continued tight margins which will give investors pause. Amazon is a great company with a terrific long-term 'story' and a vibrant future, but right now the stock is WAY over-valued at something like 70 x earnings and Q3 net profit margin of 2.82% (as opposed to an almost equally dismal 3.70% the year previous). Apple, by way of comparison, is selling at just above 19 x earnings, with Q4 net margin just above 22%. So, if you ask me, Amazon stock is poised for a fall. At least it should be.