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Amazon, Ebay, WalMart: Further Taking Stock

Read more articles on Internet Marketing and Investing.

December 1, 2006

Posted by neillevine

About This Editor: I am a writer. Have been writing for other sites, but expect to do most of my future work HERE! My expertise extends from the esoteric such as burning hydrogen to the unpredictability of the stock market and my writing makes me a jack of all trades and exasperated master of none. I have had some influence over national wildfire and water policy and there are hints of a change in energy policy, BUT as Samuel Goldwyn once said, "A verbal promise is not worth the paper it is written on."

         

So we have looked at Blockbuster and NetFlix as retail operations and also as investments.

Since we have also comparison shopped at both Amazon and Ebay, it is easy to follow up on these two companies with a look at their stocks as a way to get a better look at the dynamics of the stock market.

Amazon, ticker symbol AMZN, is an internet retail operation selling goods in several categories from electronics and apparel to books and computers.

Shares are selling at around $40 with an all time high of around $127 in 1999 and a recent high of around $61 in 2003. Gross sales for the past three years have totaled $5.2 billion in 2003, $6.9 billion in 2004 and $8.5 billion in fiscal 2005, increasing to $10.49 billion in 2006 and $12.52 billion in 2007 with earnings per share of 43 cents per share expected for 2006 and 70 cents for 2007. This makes the prices earnings ratio in the neighborhood of 60 for expected 2007 profit, making this a very rich multiple and a stock that can take a big loss very quickly on what is euphemistically called “bad news.”

Ebay, stock ticker symbol EBAY, is a competitor selling at around $32 with a high of $58 in 2004 with gross revenue of $2.2 billion in 2003, $3.3 billion in 2004, $4.6 billion in 2005 and expected revenue of $5.9 billion in 2006 and $7.2 in 2007 and estimated earnings of $1.02 in 2006 and $1.23 in 2007. Clearly, the price earnings ratio is better and the expected revenue growth just as good, making it a somewhat more attractive investment that Amazon for an investor willing to take the risk.

As a final comparison, Walmart, WMT, is currently $42 a share with an all time high over $60 in 2002 but is reporting disappointing November sales. Should this trend continue into December, the shares are likely to fall. However, if last minute decisions boost December revenue a nice uptick can be expected, especially with expected earning of $2.87 for 2007 and $3.21 for 2008. Less glamourous, since it is a bricks and mortar retailer but better stock fundamentals making it a more attractive investment. If December sales recover, I would expect the stock to hit a short term peak in January or February. Bad Christmas news, would result in the shares declining.

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