July 2012 Free Stock Pick of the Month – Amazon.com (Facebook Warning To Investors)

Posted on 19 July 2012

Amazon Stock Pick

If you’re thinking of putting money into a tech stock, forget Facebook as an investment right now. The next big tech super-power might be right under your nose; and may already be a big winner at the present time.

Warning: Plain and Simple….You are a completely misguided (and you aren’t doing any homework at all) if you think Facebook is a safe play right now (at 100x earnings). In just a few days, Facebook Inc.’s first earnings report will be released & it won’t be pretty.  As our one and only warning to investors (& MEM365 readers) thinking of buying Facebook stock at the present time, we warn you; “STAY AWAY!”.

Back to MEM365’s July 2012 “Stock Pick of the Month” (which is a much better play than Facebook).  Here is our Late-July pick….

Amazon.com, INC (Current Price: 221.50 – NYSE: AMZN – Current Quote)

At first glance (and to the untrained/novice investor) Amazon.com may look like an outrageously priced stock at over $220/share.  It may also look like it’s too late to profit from this web store giant.  But it’s not at all.  We at MakeEasyMoney365 see the Internet Superstore as a major value stock pick.

Not only do we see the current price at $222/share as a price below the company’s true value, but we also see a ton of potential for rapid growth in this company.  We feel there is a lot of opportunity when you buy a few shares of Amazon.com stock.   Here’s why….

We’ll start with the company’s financials and valuations.  Their sales have grown by over 600% since 2005.  They also currently have around six billion dollars in liquid cash right now.

Amazon’s operating margin has dropped to under 2% in 2011 (which is as low as it’s been in 10 years).  However, the operating margin includes their new Kindle business model that they implemented just over a year ago, which in-turn decreases the current margin.  But, much like video games (@ Microsoft) and iPads (@ Apple) where the loss on the sale and manufacturing costs of the hardware, could mean billions of profits in future selling of other products & apps on the Kindle Fire and Kindle readers.  This is good business, especially for companies that are financially healthy.  If all goes well with the Kindle, this could mean an operating margin as high as 10% in the very near future.   Amazon is not only taking leaps into the the latest mobile device purchases and sales, but they are doing it wisely and quietly.

More and more people are turning to Amazon.com for purchasing everything from toilet paper to high definition TV’s from the comfort of their own home.  It’s not just people in the United States either.  Almost half of the innovative web giant’s sales come from international sales, most notably, the massive Chinese market.

Amazon is also becoming the forefront for other small users & home-based businesses to sell their products online. Sellers are turning to Amazon over eBay lately.  Almost 40% of the goods sold on Amazon come from other sellers who use Amazon to sell their goods (like sellers use eBay).

In my opinion, Amazon.com has be become the “Online Wal-Mart” (without the massive overhead) combined with eBay’s fullest potential.  However, just like Wal-Mart, they are building a monopoly as the premier internet storefront that dominates the competition.   Unlike Wal-Mart (with their their “Corporate Titan” image), Amazon is a company that people love.  They have an online store that is now “cool” and “trendy” to shop at, while they continue utilizing Web2.0 and other new age marketing tactics such as Facebook and Twitter to further advance their brand.  Unlike eBay (and more like Apple and Google), this company continues to be innovative, coming out with new ground-breaking products and innovative ideas that produce big profits.

The current P/E ratio, based on Amazon’s current earnings, is around 180.  This seems high and makes the company look over-priced to some investors who fail to see the rapid-growth & game-changing potential this brand has.  As I said, we think Amazon’s profit margins could grow at a rapid pace in the very near future.  We are very excited about adding Amazon.com to our portfolio (at a price of $221.50) and we are advising our readers, friends, and family to do the very same.

So, instead of investing in profitless social media companies, who are having a difficult time figuring out how to meet their earnings benchmarks at ridiculous profit to share-price valuations, buy yourself some Amazon.  With Amazon.com, you get a stock that has the potiential, the talent, and the financial health to break into the $400-$450 range in 2-3 years.

We see Amazon.com, Inc. (AMZN) as a BUY at price under $235-$245.  We advise shareholders to keep an eye on Amazon’s operating margins for the next two years.

(Note: I purchased 50 shares of AMSN at a purchase price of $221.45 on July 19, 2012).