Amazon’s stock these days is the retail industry’s Rorschach test. What you see depends on what you want to see.
The e-commerce retailer’s stock closed at $72.81 Tuesday, more than double its showing of just four months ago ($35.02 on November 19, 2008). That’s where the facts end and the interpretations begin.
Some see Amazon as a smart online retailer and master of supply-chain efficiency benefiting from consumer interest in its new wireless reading device, the Kindle 2. In fact, Amazon CEO Jeff Bezos used the Kindle 2 to highlight the company’s effective delivery model in a New York Times article. “E-books should be cheaper than physical books,” he said. “Readers are going to demand that, and they are right because there are so many supply-chain efficiencies relative to printing a paper book.”
Other supply-chain efforts are now paying off, which is why the company is being rewarded, BusinessWeek asserts, for “expanding into new product areas and pouring money into new technology aimed at fulfilling orders more efficiently and crunching data on user buying and browsing habits.”
The Wall Street Journal calls Amazon one of “The Recession’s Early Winners,” observing, “Expect more bricks and mortar stores to close as overstretched consumers retrench. But when it comes to online retailers, the story changes.” This view of Amazon sees the company and certain other e-commerce merchants, such as Netflix, as a new breed of retailers who will survive the recession by providing desirable products at lower prices with user-friendly home delivery.
However, there’s also a less generous outlook regarding Amazon’s stock. The company’s fluctuating stock prices over the years and less than robust earnings raise doubts among stock watchers. Some who commented on BusinessWeek’s article, for example, called the stock price “absurd,” and “highly suspect,” and consider Amazon’s “the most manipulated stock in the market.” One wrote, “You would think that we were back in the bubble days of the dotcoms with the valuation afforded this stock.”
Amazon’s critics feel the media is contributing to the inflation of the company’s stock and playing right into the PR-conscious company’s hands. After all, Bezos and the Kindle 2 appeared on a range of national network TV shows in February and March, from the Today show to The Daily Show with Jon Stewart.
Is all the Amazon press simply media hype for a company that doesn’t produce the earnings to match its stock price, or is it legitimate coverage of a retailer providing the innovative new technology that consumers desire? The reality may be a little bit of both, which offers an endless cycle of fodder for Amazon’s fans and critics alike.
So, is Amazon a legitimately hot retail tech industry stock, or are investors likely to get burned? It all depends on what you want to see.