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Amazon’s Stock Jumps 16% !

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Cartoon stock market chart showing Sales are going up

The numbers are in! Thursday afternoon, Amazon finally released their sales figures for the first three months of 2012. And the stock market was absolutely thrilled by Amazon’s newest numbers, sending the price of Amazon’s stock up on Friday by more than 16%! This means that overnight, the portfolio of Amazon CEO Jeff Bezos increased by nearly $2.5 billion, and the value of Amazon’s shares increased by more than $10 billion!

Why was Wall Street so excited? After all, it turns out that Amazon increased its operating cash flow, but only by $20 million. (Unfortunately, their “free cash flow” actually dropped by $750 million — though it’s still at a hefty $1.15 billion.) But the big question was whether or not Amazon sold more books than they had the year before — and the answer is yes! In fact, Amazon’s net sales increased by a whopping 34%, to $13.18 billion, for the first three months of 2012. (Last year, Amazon only sold $9.86 billion worth of products during the same period…) Amazon’s gross margins experienced “the largest uptick in 10 years,” according to one stock analyst.

Just in North America, Amazon sales were $7.43 billion — more than 36% more than they were at the same time last year. Still, due to the higher expenses, Amazon’s total net income also dropped quite a bit, down $71 million (to just $130 million) for the first three months of 2012. But even professional stock-pickers were impressed, with at least 11 different firms raising their price-point for buying Amazon’s stock. And Amazon also announced some other very interesting statistics on Thursday.

Their Kindle Fire tablet is now the #1 best-selling item in the Kindle Store — and the #1 most-gifted item in the store! And while Amazon’s not saying how many ebooks, movies, and songs have been downloaded, they did acknowlege that in the first three months of 2012, “Nine out of ten of the top sellers on Amazon.com were digital products – Kindle, Kindle books, movies, music and apps.” Deep in their press release, Amazon also revealed that “worldwide media” sales grew 19% (compared to the first three months of last year), now representing sales of $4.71 billion. (The Christian Science Monitor noted that’s “more than twice as fast as the 8 percent year-over-year gain posted in the quarter through December.”) And “electronics and other general merchandise” sales grew 43%, to $7.97 billion.

It looks Amazon’s already starting to see a fantastic pay-off from the big bet they’d placed on Kindle Fire touchscreen tablets!

Surprises in Amazon’s New Quarterly Report?

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Amazon 9.9 billion in sales for 2Q 2011

This afternoon, Amazon finally told investors what their sales were for the months from April through June — and they surprised even Wall Street’s analysts. Compared to last year, Amazon’s net sales for the period were 51% higher. It was “the fastest growth we’ve seen in over a decade,” Amazon’s CEO Jeff Bezos said in a statement — which at times sounded more like a sales pitch for the Kindle.

“Kindle 3G with Special Offers has quickly become our bestselling Kindle at only $139,” Bezos continued, touting the convenience of not having to hunt for a Wi-Fi hotspot. But he also revealed that Kindle sales were increasing — and at a faster rate than they were last year. Of course, there might be a simple explanation for that. Amazon released the cheaper $114 “Kindle with Special Offers” in April, which you’d
expect to increase sales from the three-month lull after Christmas.

But in general, Bezos insisted, Amazon’s sales growth was being driven by “Low prices, expanding selection, fast delivery and innovation…” (It sometimes seems like Amazon is talking in code words, since they never actually reveal specifically how many Kindles they’ve sold.) Fortunately, Bloomberg News talked to an industry analyst instead, who estimated that Amazon may have sold more than 8 million Kindles just in 2010. And more importantly, they estimate that Kindle readers already account for 5% of Amazon’s total sales.

In fact, Amazon’s now approaching more than one million ebooks that are available for sale in their Kindle store (besides the millions of free, out-of-copyright books). “The U.S. Kindle Store now has more than 950,000 books,” Amazon said in a statement today, “including New Releases and 110 of 111 New York Times Bestsellers.” What’s even more remarkable is that more than 800,000 books are available for less than $9.99, “including 65 New York Times Bestsellers.” In a Tuesday conference call, Amazon spoke of a “conversion from physical to digital” in their business, and seemed to hint that those offerings had been very popular with Amazon’s customers. (“We feel very good about those investments in terms of the traction we’re getting from a customer standpoint,” an Amazon official explained.)

Sales of the Kindle and electronic merchandise “are two big drivers for Amazon that continued unabated,” one analyst told Bloomberg News. Despite some pressure from costs, “Amazon is running on all cylinders,” another analyst commented. The dark cloud is the money Amazon’s been spending to achieve all these higher sales — but even there, the Kindle’s proving to be something Amazon officials point to with pride.

“We started investing in our Kindle businesses several years ago…” one Amazon official explained on Tuesday’s call, “and those have gotten great traction…” Amazon’s now opened 15 new distribution centers — which I’m guessing will play a role when Amazon finally releases an iPad-sized tablet, possibly offering free two-day shipping as part of the deal. In Tuesday’s conference call, Amazon used the profitability of the Kindle business as an example of why that’s necessary, saying the profits didn’t happen overnight. “Those are things that have happened over an extended period of time.”

There was a 34-minute question-and-answer period at the end of the call, and somebody finally asked directly whether Amazon planned to release their own multimedia tablet to compete with the iPad. But
while the question was asked, it wasn’t answered. (“We have a longstanding practice of not talking about what we might or might not do,” an Amazon official explained, “and so I can’t — I can’t help you with that question.”

I learned something I didn’t know. More than 45% of Amazon’s sales weren’t even in North America. (Amazon also has sites for Japan, China, France, England, Germany, and Italy.) Amazon’s total sales for just the last three months were $9.9 billion — and professional investors seemed to be positively impressed.

After the stock market closed, “late trading” pushed the company’s shares up a full 6.9%

How Jeff Bezos earned $1 billion in one day

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Amazon's Jeff Bezos on the Kindle

If you’d invested money in Amazon’s stock, you’d be a little bit richer today. Amazon’s stock price shot up nearly 8% on Thursday, reaching a new all-time high. (In just 24 hours, Jeff Bezos’ net worth increased by more than $1 billion dollars….) “The shares have risen more than 20% in the last six weeks,” notes an article at Marketwatch. Investors on Wall Street apparently loved Amazon’s latest quarterly report, which show that in just the first 90 days of the year, Amazon sold $2.73 billion more than they did in the same period a year ago!

For the first three months of 2011, Amazon’s net sales had increased a whopping 38%, to $9.86 billion. If you looked at the last 12 months, Amazon’s operating cashflow also increased $250 million from the previous year. But they’ve also spent $420 million more — presumably, to grow their customer base — so Amazon’s total “net income” was 33% lower then the previous year. Still, a majority of brokers remain positive about Amazon, according to Marketwatch, with one reminding clients about Amazon’s commitment to “long-term investments at the expense of short-term margins.”

“Amazon has doubled its business in the past two years,” advised another broker at Deutsche Bank, “and may be on pace to potentially double it again in less than two years.” And citing Amazon’s earnings call, the Associated Press reported Amazon “is seeing ‘tremendous’ growth in demand, and that’s why it’s had to invest money in more warehouses and upgrading the technology that runs its Internet store.”

“We love inventing on behalf of customers,” announced Amazon CEO Jeff Bezos, “and have never been more excited about the long-term opportunities.” Then Bezos listed out everything Amazon has accomplished so far this year, “just to call out a few of the things we’ve been working on.” And it sounds really impressive when you lay them all out.

“In the last 90 days, we announced Kindle with Special Offers, Kindle Library Lending, Audible audiobooks on Kindle, Appstore for Android, Amazon for Windows Phone 7, Checkout by Amazon in both Germany and the U.K., a Kindle Store in Germany…”


There was also some interesting trivia about the Kindle buried deeper in the announcement — like the fact that there’s over 900,000 books in the Kindle store, and that 740,000 of them (82%) cost less than $9.99, “including 65 New York Times bestsellers.” Amazon’s press release also noted that there’s millions of free e-books available for the Kindle, and that last month saw the first single e-book to sell one million copies. (Stieg Larsson’s The Girl with the Dragon Tattoo.) Of course, not all the trivia was about the Kindle. In a letter to shareholders on Wednesday, Bezos also revealed that when Amazon builds a “product detail” page for a customer visiting Amazon.com, “our software calls on between 200 and 300 services to present a highly personalized experience for that customer.”

But here’s my favorite piece of trivia from Amazon’s latest round of earnings information. They revealed that they’re spending $1.6 million dollars a year just on security for CEO Jeff Bezos. Meanwhile, Bezos’s yearly salary is just $81,840 — though he also owns 20% of the company.

Which is why his personal net worth increased by more than $1 billion dollars when Amazon’s stock price shot up nearly 8% on Thursday.

Barrons says Amazon “is Smoking”

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Amazon Kindle yearly sales figures by Barrons analyst

What do things look like for Amazon — both now, and in the future? Today two technology analysts delivered their verdict: “Amazon is Smoking with Kindle”. That’s the headline at Barrons.com, in their “Hot Research” column, highlighting a report by Stan Velikov and Sandeep Aggarwal. They’re predicting that the number of Kindles Amazon sells in 2012 will be more than double the number of Kindles that they sold just last year — and that for the next 12 months, Amazon’s Kindle sales will increase by more than 50%.

“In our view,” the two analysts write, “Kindle remains the best ebook reader in the market and competition is unable to dent its market share.” They predict that over the next year Amazon will spend more money on Kindle advertising — and they think it’s a good idea, arguing that Amazon is just “strengthening its competitive moats.” They’ve also upgraded their past estimates for Amazon’s sales of the Kindle. For last year they now believe that Amazon sold a whopping 6.1 million Kindles, earning them $3.31 billion in Kindle-related revenues. Yet for this year, Barrons estimates that Amazon will sell more than 50% more Kindles than last year — earning revenues of $5.53 billion by selling another 9.3 million Kindles by the end of the year!

But what’s even more interesting is that comes out to an average of more than $500 per Kindle! I’m not sure what to make of those numbers — even if you remember that the Kindle 2 cost $260 for the first half of 2010. They’re still predicting an even higher average revenue of $594 per Kindle in 2011, when most Kindles will be much cheaper. (The Kindle 3G costs just $189, and there’s also the cheaper $139 model). It seemed like they’re estimating that the average Kindle owner spends at least $300 a year purchasing ebooks — until I remembered remember that the larger Kindle DX costs $379. But even if half the Kindles purchased were the more expensive Kindle DX, Barrons is still estimating that the average Kindle owner spends a lot of money on ebooks — about $240 apiece. I guess that’s possible — that’s $20 a month, or about two $9.99 books every month. And of course, the price of ebooks is also rising, which seems to be reflected in their estimates for the future.

So what happens in 2012? Barrons predicts that 12.5 million Kindles will be sold! (That’s twice as many as in 2010, now earning Amazon another $7.96 billion in revenue.) And these predictions are especially significant, because Barrons is the official newspaper of Dow Jones & Company (which also publishes the Wall Street Journal). In fact, Clarence W. Barron, the man the newspaper is named after, is considered “the founder of modern financial journalism,” according to Wikipedia. Barrons is publishing research from an investment firm, so it’s not the official opinion of Barrons.com.

But it’s still an authoritative prediction that Amazon’s Kindle sales…are smoking!

Amazon yearly Kindle sales (estimate by Barrons)