Amazon.com (AMZN) gets a couple of votes of confidence this morning regarding its recently introduced “Kindle Fire” tablet computer.
Kerry Rice of Needham & Co. raised estimates for the year, to $48.95 billion in revenue and $1.34 per share in profit, up from a prior $48.3 billion and $1.10, writing that the Fire, which went on sale last week for $199, may sell 4 million units this quarter, double what Rice previously expected.
That could add up to an additional $400 million in revenue this quarter. Plus, a report by IHS iSuppli a week ago indicates the Fire’s bill of materials is $202, less than the $280 that had originally been estimated, which will help Amazon’s bottom line. And the higher number of Fire units sold may add $100 million to Amazon’s “digital goods” sales in the quarter.
Moreover, holiday spending is starting off strong and should beat Street expectations:
According to Chase Paymentech�s Cyber Holiday Pulse Index, online holiday spending in the first 21 days of November increased 31% above last year. eMarketer, comScore, Forrester, and Shop.org estimate a 16% YoY increase in online holiday spending. While we expect the pace of sales to slow from Cyber Monday until the week before Christmas, we do not expect sales growth to fall 50% from current levels.
For 2012, Rice estimates $65.4 billion in revenue and $2.40 per share in profit, up from a prior $64.16 billion and $2.13.
Rice rates Amazon shares Hold.
Likewise, Citigroup’s Mark Mahaney this morning reiterates a Buy rating on Amazon, writing that the new $79 version of the Kindle, plus the new “Kindle Touch,” which starts at $99, “will further expand the eReader market and strengthen AMZN�s market share.”
His “checks” suggest Amazon may sell 30 million units of all Kindle devices next year, up from a prior 26 million-unit forecast. Combined with content sales, that would contribute $7.7 billon in revenue to Amazon in 2012.
As far as the Fire, he sees it selling 12 million units in 2012, generating $3.2 billion in device and content sales, despite some growing pains in this first version:
The Fire is pretty good, but not great. A bit clunky. Kind of like the original Kindle. But the path is clear � with an aggressive pricing strategy, an unmatched content cross-sell opportunity, a market-smart form factor, and probable product improvements � AMZN can own a substantial segment of the Tablet market.
He sees the Fire getting better: “Product improvements are almost certainly going to improve the Kindle Fire. A more responsive touch screen and more intuitive controls would help.”
Mahaney raised his 2012 revenue forecast to $66.6 billion from a prior $65.8 billion, but he also lowered his 2012 EPS estimate to $2.48 from $2.54 per share to account for dilution from the Fire’s cost of goods.
Amazon shares this morning are down $3.81, or 2%, at $188.52.
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