Fool Portfolio Report
Tuesday, October 14, 1997
by Jeff Fischer (JeffF@fool.com)
ALEXANDRIA, VA (Oct. 14, 1997) -- This morning AMAZON.COM (Nasdaq: AMZN) announced that it had broken an e-commerce record by serving its one millionth unique customer. Jeff Bezos, the CEO, said two years ago that Internet growth was going to be so rapid that one day the Internet would be nowhere, and the next day it would be everywhere. Already the Internet has been growing swiftly enough to fulfill his prediction, and Amazon has been able to tap into that growth with skill. It took America Online several years to reach one million individual accounts in different times. Now, enough people are online that if you're merely able tap the appropriate spring, water will come rushing in.
At the end of March Amazon had served 340,000 individual accounts. By the end of June that number grew 79% to 610,000. Now, just over three months later, over one million accounts have purchased from Amazon, a 64% increase from the end of last quarter. The company estimates that 4.5% of all Web households paid a visit to Amazon in August, which isn't difficult to believe considering the company's search engine deals and advertising blitz. Amazon received more traffic than leading Internet retailers wal-mart.com, QVC.com, and landsend.com combined.
Interestingly, Amazon is the only bookseller to make the "top 500 Web sites" list. Barnes & Noble hasn't made the list. How likely is it that Borders will be able to make the list when it goes online by the end of the year?
Let's slap a conservative 20% quarter-over-quarter sales growth rate on Amazon's next three quarters and see what we have (conservative because we've seen customer accounts grow 79% and 64% in the last two quarters). After $27.9 million in second quarter sales, twenty percent growth would give Amazon $33.48 million in sales for the recent quarter that will be announced on October 23rd. We then have $40.17 million for the holiday fourth quarter (how do you spell conservative? F-O-R-T-Y Million in the holiday quarter). Twenty percent growth on top of that $40 million gives us $48.21 million for the quarter beginning in January. Three quarters of at least 20% sales growth would give Amazon $120 million in trailing sales, and a current stock price at 9.4 times sales. Growth of 25% per quarter would give Amazon $161 million in trailing sales and a stock trading at seven times sales. For context, that's half the price to sales ratio granted Microsoft, while Yahoo! trades at 58 times sales.
Important in the most recent earnings release was the statement that 50% of all purchases came from repeat customers. Hopefully Amazon will share this figure again when it announces results next week. Perhaps the company will also have thoughts to share regarding advertising. Advertisers are eager to pay Amazon for ad space, and the company will gladly accept the high gross margin revenue when it's ready. It would be nice to have advertisers by the holidays, though my guess is that December is early for Amazon to get into the ad business.
Elsewhere in the news today, GENERAL MOTORS (NYSE: GM) announced record earnings of $1.35 per share, crushing estimates of $1.21 a share. This was the best quarter in GM's history, which began in 1908.
General Motors is sitting on equity of over $7.30 per share, while the stock trades at 8.7 times the 1998 earnings estimate of $8.00 per share. Today at least one analyst raised estimates for 1997 from $7.65 per share to $7.85, so 1998 estimates will likely be increased as well. The Fool has gained 35% on this giant Foolish Four stock since August of last year (not including dividends), while the S&P has gained about that same amount.
3COM (Nasdaq: COMS) announced a new family of Fast Ethernet hubs for small offices, but the stock fell with tech stocks, which fell in advance of the earnings report from INTEL (Nasdaq: INTC). KLA-TENCOR (Nasdaq: KLAC) also dropped without news, though likely in anticipation of Intel's numbers as well. After the bell Intel announced earnings that were slightly below estimates, though up 19% from last year. Intel was the first purchase in the Drip Portfolio, and today a collection regarding the second purchase, Johnson & Johnson, is available. Today's Drip recap deals with investing carefully in a strong market where many leading stocks trade at historically high multiples.
All told, the Fool Portfolio suffered a weak day, falling 0.90% while the S&P gained 0.23% and the Nasdaq fell 0.54%. Tom and David are enjoying California, we hear, so they weren't around to lament the day. I'll lament three-fold for them. Tomorrow, Tom and David are in Santa Barbara and Thousand Oaks. Pay 'em a visit!
Drip Portfolio --
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Fool Four Portfolio -- 23% annually, historically.
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Daily Double -- Good business?
Daily Trouble -- What went wrong? Learn from it.
Fribble -- A fun lesson from readers.
Stock Change Bid ---------------- AMZN - 1/8 47.63 AOL - 1/16 83.06 T + 3/8 45.94 CHV --- 85.50 DJT + 3/16 10.13 GM -1 1/16 70.38 INVX - 1/8 30.88 IOM - 1/4 24.75 KLAC -3 7/16 67.88 LU -1 88.00 MMM +2 1/4 98.69 COMS -2 53.19Day Month Year History FOOL -0.90% 1.93% 28.31% 242.44% S&P: +0.23% 2.43% 30.99% 111.67% NASDAQ: -0.54% 2.79% 34.22% 140.61% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 83.06 1042.09% 5/17/95 980 Iomega Cor 2.52 24.75 882.14% 10/1/96 42 LucentTech 47.62 88.00 84.81% 8/11/95 125 Chevron 50.28 85.50 70.03% 8/24/95 130 KLA-Tencor 44.71 67.88 51.81% 8/12/96 110 Minn M&M 65.68 98.69 50.26% 8/12/96 280 Gen'l Moto 51.97 70.38 35.41% 9/9/97 290 Amazon.com 38.22 47.63 24.60% 8/12/96 130 AT&T 39.58 45.94 16.07% 8/13/96 250 3Com Corp. 46.86 53.19 13.51% 6/26/97 325 Innovex 27.71 30.88 11.42% 4/30/97 -1170 *Trump* 8.47 10.13 -19.56% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 29487.19 $26905.32 5/17/95 980 Iomega Cor 2509.60 24255.00 $21745.40 8/12/96 280 Gen'l Moto 14552.49 19705.00 $5152.51 8/11/95 125 Chevron 6285.61 10687.50 $4401.89 8/12/96 110 Minn M&M 7224.44 10855.63 $3631.19 8/24/95 130 KLA-Tencor 5812.49 8823.75 $3011.26 9/9/97 290 Amazon.com 11084.24 13811.25 $2727.01 10/1/96 42 LucentTech 1999.88 3696.00 $1696.12 6/26/97 325 Innovex 9005.62 10034.38 $1028.76 8/12/96 130 AT&T 5145.11 5971.88 $826.77 4/30/97 -1170*Trump* -9908.50 -11846.25 -$1937.75 8/13/96 250 3Com Corp. 11714.99 13297.50 $1582.51 CASH $32438.81 TOTAL $171217.62