Kindle Sales Will Fire up Amazon’s Earnings Next Week

by Trefis Team
+14.92%
Upside
325
Market
373
Trefis
AMZN
Amazon
Rate   |   votes   |   Share

It’s common news that Kindle Fire is selling like hot cakes. But how many has Amazon (NASDAQ:AMZN) actually managed to sell in the fourth quarter? We’ll get more clarity on the actual numbers when the company releases its Q4 earnings on January 31. For now, all that Amazon has declared is that it has sold 1 million Kindle units each week of December 2011, [1] while market research companies and equity analysts wriggle over their own estimates. IHS Suppli estimates 3.9 million, Barclays projects 5.5 million, and NPD DisplaySearch expects 6 million, according to a CNET report. [2]

Whatever the number may be, this bodes well for Amazon which has been struggling with razor-thin margins and hopes that strong Kindle sales will lead to more consumption of its e-content in the form of e-books, games, video, music, etc. (See Amazon Q4 Preview: Can the Fire Keep Burning in 2012?)

Our complete analysis for Amazon’s stock is here.

The number of Kindle Units sold has increased from 0.2 million in 2008 to an estimated 16 million in 2011, by our analysis.

Apart from being very competitively priced at $200, Kindle Fire has some great features like unlimited cloud storage, integration with Amazon services like Prime (through which you can stream unlimited number of movies and TV shows), e-books, and games. However, Apple’s iPad beats Kindle Fire as it has a superior processor, significantly huge collection of apps, and much larger internal storage – but it’s also priced way higher at $500.

Media consumption will be key for Kindle’s future performance and in improving the company’s overall profit margins. Recently, RBC Capital Markets came up with a statistic projecting an expected lifetime operating income of $136 for the Kindle Fire. This is encouraging given that Kindle Fire is at a early stage of its launch. (See Kindle Fire Lifetime Value Should Give Investors Cheer Heading into Q4 Results)

While we estimate the number of Kindle Units Sold to increase from 20 million in 2012 to 30.8 million by the end of our forecast period, Trefis members project an increase from 21.9 million to 35.3 million during the same period. The member estimates have no significant impact on the Trefis price estimate for Amazon’s stock because Kindle Hardware business accounts for only 1.1% of our stock price estimate.

We currently have a Trefis price estimate of $233 for Amazon’s stock, about 21% above the current market price of $192.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. Kindle sales top 1 million per week in December, CNET, Dec 29, 2011 []
  2. Kindle Fire sales were on fire last quarter, analyst says, CNET, Jan 9, 2012 []
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!