Kindle sales will be better than expected in 2010, and Amazon will deliver a monster year, says Mark Mahaney of Citi in a new report.
He sees Kindle unit sales hitting 2 million, up from previous estimates of 1.5 million. Kindle device and book sales will total $1.6 billion for 2010. That’s 5% of Amazon’s total sales.
“The Kindle has definitively established itself as the ‘iPod of the Book World,'” says Mahaney.
He’s upping his price target on the stock to $170 from $140. He’s also raising fourth quarter EPS by $0.08 to $0.72 and 2010 EPS by $0.40 to $2.92.
Here’s four key near term updates from Mahaney:
- eCommerce Channel Checks suggest accelerating Online Retail and AMZN market share gains – 73% Y/Y holiday SSS growth on AMZN’s platform, per ChannelAdvisor.
- comScore Traffic Analysis shows accelerating AMZN Website trends – 19% Y/Y visitor growth in Oct. & Nov. vs. 18% Y/Y in Q2 and 9% Y/Y in Q2.
- Quarterly eShopping Cart analysis continues to highlight AMZN Selection Superiority and Competitive Pricing Position
- NPD Video Game Console & Software QTD Sales Trends indicate Less Worse – though clearly still weak (down 24% Y/Y/down 8% Y/Y) – trends.
Here’s three broad points supporting an increase in estimates from Mahaney:
- Our thesis is that the Recession likely accelerated the share shift of Retail Sales online, given consumers’ greater focus on price shopping and the deterioration in Offline Retail options.
- Amazon — due to its consistent focus on customer service, selection, and convenience as well as its successful product expansion (including the Kindle) and International Prime rollout – has been extremely well positioned to benefit from this Online share shift.
- Amazon’s scale advantage has translated into key and sustainable leverage expansion (e.g. Q3 Fulfillment cost at a historic low as a % of revenue), although R&D cycles will surely continue to resurface in the future.
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