Why Amazon's Kindle Fire Gambit Is Paying Off

The following video is part of our "Motley Fool Conversations" series, in which developer Chris Bledsoe and senior technology analyst Eric Bleeker discuss topics around the investing world.

In today's edition, Eric asks Chris how traffic to Fool.com has trended recently as Apple stole back market share from Android. As has always been the case, iOS traffic is far ahead of Android, but what's especially surprising is that iPad traffic is twice Android traffic of all kinds -- tablets and smarpthones! That creates an "engagement" problem, with Android users not being as active with their phones. Such engagement issues would be bad news for Amazon.com and its Kindle Fire tablet, since Amazon pursues a strategy of losing money on the hardware and recouping that loss with later sales. However, as data from app-analytics company Flurry shows, Kindle Fire users are far ahead of other Android tablet users in terms of downloading apps. That's great news for Amazon, as it shows that its Kindle Fire business model has a far better chance of paying off.

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Chris Bledsoe owns shares of Google. Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Google, and Motley Fool newsletter services recommend Apple, Amazon.com and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 31, 2012, at 11:22 PM, monkeywrenchgirl wrote:

    Don't trust the Kindle hype. Investigate.

  • Report this Comment On February 01, 2012, at 5:18 AM, H3D wrote:

    As of yesterday amazon had TTM earnings of $866m and the market was allowing it nosebleed valuation with a P/E of 102 giving a capitalisation of $88.4 and a share price of $194

    This morning Amazon will open with TTM earnings of $631 million.

    Unless the P/E is allowed to rise further, absurd considering the slowing revenue growth, then for a P/E of 100 Amazons share price needs to drop to $138.7

    But that's not all.  Amazon guided $100m profit to $200 loss this quarter.  That is down from $201m profit Q1 last year.

    We can price in the best case now.  In three months time, if Amazon hit their top end expectation, and keep the PE of 100, then a capitalisation of $53.1 B means a share price of $116.7

    The mid point would give a share price of $83.7

    And Amazons low end prediction would give a share price of $50.8

    And remember, all of that is if they keep their nosebleed P/E of 100

    Amazon is an excellent business.  But it's current share price is absurdly high.  

    A 9% drop doesn't come close to fixing that.

  • Report this Comment On February 02, 2012, at 8:31 PM, madr1727 wrote:

    It's a great idea. You don't have to make a killing on the hardware. Keep it cheap and sell more. The more people who own them, the more people who will spend money on the apps, books, movies and everything else it does.

    http://www.facebook.com/pages/The-Amazon-Kindle-Fire-Full-Co...

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