3 Must-Reads: Amazon.com, Westport, Facebook

In our first ever installment of the "Best of the Blogs" series, we highlight three of the top articles from the Motley Fool Blog Network that have crossed our radar recently. Here are a few of our current favorites.

Amazon.com: shooting star or lead balloon?
In the first part of his three-part series titled "Amazon is Overvalued and on the Wane Part 1," M. Kevin Flynn launches a rousing set of attacks against retail behemoth Amazon.com (Nasdaq: AMZN  ) . To set the tone, the opening salvo hits it mark: "Trees don't grow to the sky and neither will Amazon. When a stock is priced for a stratospheric rise, it invites skepticism."

The question, of course, is whether the skepticism is truly warranted? Looking 10 years back to the wake of the dot-com explosion and subsequent fallout, there were few who saw the potential in any online business, especially one that sought to conquer the 21st-century consumer by selling deeply discounted books. Yet conquer it seemingly has. However, as Kevin points out, that was then and this is now. Faced with myriad challenges, should Amazon continue to enjoy the type of sky-high valuation that's typically reserved for small, agile tech companies still regarded to be in their infancy? The question, as Kevin eloquently states, comes down to whether you believe Amazon is a technology company or a retailer.

Of course, there's the Kindle, which Amazon aggressively markets as a classic razor-and-blade model, but unlike Gillette, it's questionable how much brand power exists for Amazon's "blades." The even bigger issue here, as Kevin illustrates, comes down to an impending tsunami of competition that could threaten to extinguish the Kindle. One has to wonder how much longer the Fire will burn.

Similarly, given the mounting competition for its Web services, will Amazon's cloud platform potentially be eclipsed and overshadowed? Even when one considers all of the potential paths for the company, Amazon ultimately looks more and more like a glorified retailer. One needs to look no further than its margins.

So where will all of this implied growth come from? Just as with any retailer, efficiency will get you only so far. To give Wall Street what it wants, Amazon will need to expand its physical footprint in terms of more "fulfillment center" square footage. And here's where heavy capex rears its ugly head. Revenues will increase, but intrinsic value to the shareholder doesn't come from the top line.

Could it be that Amazon has reached the point in its business evolution that Wal-Mart (NYSE: WMT  ) finds itself residing in? Sam Walton pioneered the use of massive efficiencies of scale to undercut the mom-and-pops all throughout the land long before Jeff Bezos was even around to have the Amazon twinkle in his eye. But now ol' Wally World, facing a decade of virtual stagnation in its stock price, has been siphoning the cash flow from its retail printing presses here in the U.S., to subsidize deeper penetration into significantly less lucrative foreign markets, some of which currently offer returns below Wal-Mart's cost of capital. Will Amazon fall prey to the same allure of top-line growth at whatever cost?

Westport: lead, don't follow
In her first foray into the TMF Blogosphere, Caltech Ph.D. Pam Peerce-Landers has not only managed to receive a tip of the editorial hat in the form of an Editor's Choice award, but she has also caught the attention of one of our Foolish founders, who has graciously offered his praise for her work. Pam lays out an insightful analysis chock-full of useful information for the investor as well as the heavy-duty CNG pickup truck consumer alike in her post "Things to Consider in a Natural Gas Pickup Truck."

Westport Innovations (Nasdaq: WPRT  ) is the cornerstone in the compressed natural gas technology that's implemented in recently rolled-out Ford models. Of particular note was Pam's breakdown of the payback of the initial investment (the price increase resulting from Westport's equipment) as well as the potential savings that can accumulate over time in the form of lower fuel costs after breakeven has been reached. While her analysis is predicated on several assumptions, as Pam points out: "The nice thing, in a way, is that the worse your mileage, the faster you pay off the CNG option. Of course, the more you drive the quicker the payback time."

Pam also brings to light further incentives that could be available at the state level, some of which would potentially further reduce the payback period, thereby increasing the lifetime savings from the CNG option.

It's comforting to know there are people like Pam who are so incredibly well informed about a given topic, and who has the ability to convey this valuable information in a manner that anyone can easily understood. To prove the point, Pam describes a personal experience in which she test-drove a Ford truck outfitted with Westport's technology, and she had the wherewithal to notice that the CNG tank consumed 2 feet of otherwise open bed space. Now, to the non-truck owner, this may seem like useless information, but to the contractor or the do-it-yourself weekend warrior, that reduction of bed space can become a critical factor.

Pam sends off her article in a final sentence that offers a link to Westport's payback calculator with an endearing message: "just be sure to read the instructions first." It seems as though this is invaluable advice not only for the trucking enthusiast looking to purchase a CNG pickup, but also for the individual investor looking to broaden his exposure to some of the most innovative companies of our time.

From premarket stud to IPO dud
How could our inaugural roundup be complete without mention of one of the biggest flops in IPO history? In her article "Would You Buy a Smartphone from Mark Zuckerberg?," Karen Rogers takes Facebook (Nasdaq: FB  ) to task for thinking about plunging into the crowded pool that is the smartphone market. Given the plethora of intense competition from the likes of Apple (Nasdaq: AAPL  ) and Google, Facebook has plenty of catching up to do if it hopes to develop an operating system to rival the Android and iOS industry heavyweights.

Furthermore, as Karen says, manufacturing on the hardware side of the business "traditionally carries high start-up costs and yields low margins." Karen points out here, too, that the industry giants have a huge leg up, as they have travelled the learning cost curve, continuously invest heavily into R&D, and enjoy an unparalleled global reach. Facebook is far behind and could struggle to keep its head above these waters.

Karen acknowledges the potential for Facebook to partner with one of the majors to buoy itself among the competition, but she cautions investors about the strategic direction of Zuckerberg's newest potential move. Will Facebook sink or swim? Only time will tell, but if the recent precipitous decline in the company's share price is any indication, it may want to ensure there's a lifeguard on duty. I think Karen says it best as she exclaims that "Facebook investors could have a lot more than a botched IPO to worry about!"

Keep up the search
If you're an investor in any of these companies, the need to stay updated on business events is critical. Especially with Facebook, Westport, and Amazon all being high-growth companies that are rapidly changing, their stories and opportunities are in motion. To help investors keep up to date, The Motley Fool has created a free My Watchlist service that delivers continuing analysis on any of your favorite companies. Follow the links to get started:

Michael Finarelli owns shares of Apple and Google. The Motley Fool owns shares of Amazon.com, Westport Innovations, Apple, Facebook, Ford, and Google. Motley Fool newsletter services have recommended buying shares of Apple, Amazon.com, Ford, Westport Innovations, and Google, creating a bull call spread position in Apple, and creating a synthetic long position in Ford. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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