Amazon’s Kindle Sales Expected to Rise

Amazon’s (NASDAQ:AMZN) e-reader Kindle is showing promise. Kindle Units sales have increased from 0.2 million in 2008 to 1 million in 2009. [1] We expect higher sales growth for Kindle over the years. However, an upside in Kindle hardware sales wouldn’t directly mean much for Amazon’s stock.  We estimate that Kindle hardware accounts for only around 1% for Amazon’s stock.

Amazon competes with Apple (NASDAQ:AAPL), Barnes & Noble (NYSE:BKS) and Sony (NYSE:SNE) in the e-reader market. We currently have a Trefis price estimate of $107 for Amazon’s stock, about 27% below the current market price of $147.

Rising sales of Apple’s iPad and Amazon’s Kindle are indicative of the growing popularity of mobile e-readers and tablets among consumers. Amazon has established relationships with publishers and has one of the widest selection of ebooks, which should help it retain and gain market share. Pricing competition with Apple and Sony has led to Kindle price reductions in the past and we expect further price declines.  Lower prices can help to further stimulate demand and lead to higher Kindle unit shipments.

The average of Trefis member forecasts for Kindle Units Sold indicate an increase from 3.5 million in 2010 to 12 million by 2016, compared to the baseline Trefis estimate of an increase from 2 million in 2010 to 9.8 million by the end of the Trefis forecast period. The member estimates have no significant impact on Trefis price estimate for Amazon’s stock.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Amazon’s stock to Kindle Units Sold.

Our complete analysis for Amazon’s stock is here.

Notes:
1. Historical figures for Kindle units represent estimates based on publicly reported information