Earlier this month, Citigroup analyst Mark Mahaney estimated that Amazon (AMZN) would sell 1 million of its new Kindle e-book readers this year. Today, JPMorgan’s Imran Khan takes a more conservative view: He thinks Amazon will only sell about 500,000 Kindles this year. (At current prices, at least.)
Either way, it won’t be material to Amazon’s business this year, of course:
- Khan thinks Kindle sales will represent about $63 million in revenue this year, or less than 1% of the $21.9 billion the Street expects Amazon to report.
- And assuming a 15% margin on Kindle sales, Khan estimates that 500,000 units sold could generate $0.02 of earnings per share this year — less than 2% of the Street’s $1.47 EPS consensus.
- How about e-books? That’s the point, after all. Khan estimates that selling one $8 e-book per month to 1 million subscribers would contribute $0.05 to Amazon’s annual EPS. Still small, but better — and the reason Amazon needs to make Kindle software available for more devices, like Apple’s iPhone and iPod touch.
But the good news: If the Kindle does take off like Apple’s iPod, it could be a very real business for Amazon, very quickly.
Once the company gets to scale, if Amazon can get 6 million subscribers who buy two books a month (or 1 book and a newspaper subscription), Amazon could make $0.42 — almost one-third of this year’s EPS — from the Kindle, Khan says.
That will inevitably come with reduced dead-tree book purchases, but still nice.
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