Today (Friday), Money Morning Defense & Tech Specialist Michael A. Robinson appeared on FOX Business' "Varney & Co." to tell investors what he sees for the future of Amazon.com (Nasdaq: AMZN) stock.
- Internet Sales Tax Sticks It to the Nation's Little Guys
- Why AMZN Stock is Soaring
- Does the "Showroom Effect" Spell Trouble for Amazon (Nasdaq: AMZN)?
- Will the Microsoft (Nasdaq: MSFT) Deal with Barnes & Noble Work?
- Amazon.com Inc. (NASDAQ: AMZN) Will Get Burned by the Fire
- Amazon.com Inc. (Nasdaq: AMZN): Growth Phase Pinches Profits, but Investors Should Ride it Out
- Amazon Kindle Tablet Will Plump Revenue and Disrupt Market
Money Morning Capital Wave Strategist Shah Gilani joined FOX Business' "Varney & Co." today (Wednesday) to discuss whether two hot stocks in the market right now, FB and AMZN, are good buys.
Gilani shocks Varney when he tells him what he's doing with AMZN right now...
Cloud computing is going to grow from about $41 billion in 2011 to $241 billion in 2020. Here are the tech stocks that stand to benefit the most. Read more...
Supporters of the Internet sales tax continue to pitch it as a "fairness" issue - but experts say the tax would do costly damage to our economic recovery.
The Internet sales tax would allow states to make online retailers collect taxes on purchases. It would replace a 1992 Supreme Court decision that said a state can't force a retailer to collect sales tax unless the retailer has a physical presence in the state.
State and local governments support the bill, claiming they are losing tax revenue under the current system. Several big-box merchants, brick-and-mortar stores, and mom-and-pop shops back the bill, arguing online retailers have an unfair price advantage.
But Illinois Policy Institute's Ted Dabrowski told FOX Business Network's "Varney & Co." this tax wouldn't achieve any of its promises.
"Anybody who tries to pitch this new tax as a fairness tax is not telling the truth," said Dabrowski. "What this really is is a money grab. It's a money grab by states like Illinois, New York, California who don't manage their own budgets and are not fiscally responsible. And it's another Obama tax on the middle class, it's another tax on entrepreneurs, and it's just the wrong thing for our country. It's a job killer."
Dabrowski told host Stuart Varney that Illinois tried taxing the Internet retailers two years ago, but it was a "failure." Dabrowski said the state government expected the tax to raise $150 million, but after three months had only collected $3 million.
That's because online retailers left the state to avoid the tax and set up shop in more business-friendly states. The smaller online retailers had to shut down because of the added expense.
The bill probably sounds familiar. A similar one made the rounds in 2012, but expired.
Now it's on the fast track to get passed, thanks to persistence by Sen. Harry Reid (D-NV).
According to a letter sent to Reid from seven U.S. senators, Reid used a procedural maneuver to avoid the typical committee process and rush the Senate's vote on the bill, known as the Marketplace Fairness Act.
It passed a test vote Wednesday 74-23, and could come up for a final vote as early as today (Thursday).
A controversial Internet sales tax moving through Congress will mostly benefit big corporations and state governments while hurting thousands of small businesses and consumers.
The Marketplace Fairness Act would essentially end tax-free Internet shopping by forcing online retailers with revenue of $1 million or more to collect sales taxes for the states in which their customers reside.
As it stands, online retailers do not have to collect sales taxes from out-of-state customers unless the retailers have a physical presence in that state, like a store or a warehouse.
Yesterday (Monday), the bill passed a procedural vote in the Senate by a 74-20 margin, which strongly hints at passage in the upper chamber in a vote expected later this week.
While there's more resistance to an Internet sales tax in the House, the bill is known to have bipartisan support there as well. President Barack Obama also has voiced support for the bill.
If it becomes law, the Marketplace Fairness Act will radically change the online shopping landscape.
"It really should be renamed the Internet Tax Collection Act because it is going to make online businesses the tax collectors for the nation," complained Sen.Kelly Ayotte, R-NH, one of the most vocal opponents of the bill.
Money Morning's Chief Investment Strategist Keith Fitz-Gerald joined Fox Business' "Varney & Co." Friday to talk about the value in Amazon.com. Keith explained how Amazon.com's Q3 outlook isn't a bad thing.
Keith also shared a stock that he sees outperforming in this economy, and talked about how the GDP numbers highlight the "mess" Washington has created for the U.S. economy.
Watch this accompanying video for Keith's full analysis.
That means Amazon's hot new Kindle e-reader will no longer be found on the shelves of one of the biggest U.S. chain retailers.
The "Showroom Effect" is a phenomenon in which consumers use brick-and-mortar stores to test drive certain products before purchasing them online at a lower price.
This isn't the first shot fired in the war between the world's largest online retailer and the second largest discount retailer in the United States.
The Beef with AmazonRetailers have long complained of Amazon's unfair competitive advantage because the online retailer is exempt from charging state and local sales taxes.
Last spring, Target, along with Wal-Mart Stores Inc. (NYSE: WMT), Best Buy Co. Inc. (NYSE: BBY), The Home Depot Inc. (NYSE: HD), and other retailers threw their collective weight behind the Alliance for Main Street Fairness, a coalition that is leading efforts to change sales-tax laws in more than a dozen states, including Texas and California.
But the sales tax gap is just part of the problem.
During last year's holiday shopping season, Amazon offered 5% discounts up to $5 to "show-rooming" consumers who used the online giant's Price Check mobile app in a physical store-in essence, encouraging the Showroom Effect.
In response, Target sent a letter to its suppliers urging them to help combat the Showroom Effect, either by delivering more in-store exclusive products, or by helping to them to match the prices of Target's online rivals, including Amazon, TigerDirect, Overstock.com Inc. (NasdaqGM: OSTK), and eBay Inc. (NasdaqGS: EBAY).
Even still, retailers like Target have other issues with online competitors like Amazon - such as what happens after the sale.
The duo is pairing to create a new subsidiary, with Microsoft taking a 17.6% stake. Microsoft will invest an additional $305 million over the next five years.
The deal gives the tech giant a long-desired grip in the business of e-books and college textbooks, which are moving to electronic distribution.
Microsoft will highlight a Nook app later this year on its Windows 8-powered tablets. This will let it compete against Apple Inc.'s (Nasdaq: AAPL) iPad and Amazon.com Inc.'s (Nasdaq: AMZN) Kindle Fire.
"It's a good strategic deal," Sid Parakh, an analyst at fund firm McAdams Wright Ragen, told Reuters. "It gets Microsoft in the game for e-readers, and gives them access to a market that has been growing nicely and they've basically sat out of. It also makes Windows 8 a more compelling platform from an e-readers perspective."
Microsoft Moves To MobileMonday's deal is a new chapter for both companies, especially Microsoft.
Microsoft has been testing the waters of the e-book field but has yet to really get its feet wet. Since it launched e-book software in 2000, it has never been able to amass a significant library. In fact, this software will be shelved on Aug. 30.
"The shift to digital is putting the world's libraries and newsstands in the palm of every person's hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content," Microsoft President Andy Lees said in a statement.
Microsoft has been overhauling its approach to mobile, which has taken a back seat to Apple's iOS and Google Inc.'s (Nasdaq: GOOG) Android. This new deal may just take a bite out of Apple or have Google ogling.
The move could be a game changer for Windows 8, as well as the Nook.
Amazon.com, Inc. (NASDAQ: AMZN) has lost its focus.
The pioneer of clicks for sales has decided it wants to be the next Apple Inc. (NASDAQ: AAPL).
But there's a big difference between selling other people's products for a profit on a Website and becoming the provider of custom hardware solutions for retail buyers.
This transition isn't going to end well.
The Amazon Fire is a chopped-down tablet designed to compete with the iPad. There is a world of difference between the two products and where they are in their lifecycles.
Amazon is selling its Fire tablet for half the price of the iPad, which looks great on the surface. When you compare exactly what each product brings to the table, though, it's obvious the iPad 3 (due in mid-March) will douse the Fire.
The iPad 3 will have a slew of hardware enhancements over the last iPad, and while iPad 2 was a generational upgrade over the original, it still caught the world by surprise.
The tablet market has tried before to build a better-valued product to compete with the iPad, which is where the Amazon Fire comes into play.
The reality is that the Fire is a first-generation equivalent to the iPad but with smaller physical size and limited features.
The Fire is easily two years behind the curve in the Apple-equivalent build cycle of features for same purchase price. Two-year-old technology is an eternity when you're competing against the best product designers on the planet.
This is important because the bar continues to rise, and Apple can start to sell a similar product with a premium feature set at a slight markup, destroying Fire's niche.
This weakness is a terminal issue in my opinion.
When you think about it, Amazon is subsidizing the construction and sale of the Fire, with estimated losses on each unit, as it deploys them around the world to users.
This makes me wonder when the pain of the Fire will cause Amazon to adopt a less volatile business plan.
So it's time to sell Amazon.com Inc. (NASDAQ: AMZN) (**). The Fire will continue to burn investors in Amazon for quarters.
Amazon.com reported net income of $177 million, or 38 cents a share, compared to net income of $416 million, or 91 cents a share, for the same period the previous year - a 58% plunge. Revenue jumped to $17.4 billion, a 34% rise from the $12.95 billion in 2010's fourth quarter.
While revenue fell slightly short of Wall Street's expectations, earnings were more than double the predicted 17 cents a share. Amazon.com had given fourth-quarter guidance with a revenue range of $16.5 billion to $18.7 billion.
Amazon.com revenue got a healthy boost from sales of Kindle Fire, the tablet and e-reader running Goolge Inc.'s (Nasdaq: GOOG) Android software. Total sales of the Kindle Fire and other e-reader devices increased 177% in the nine-week 2011 holiday season compared to the same period in 2010. The company reported that Kindle Fire is the No. 1 selling product available on Amazon.com since it was introduced in November.
In addition to its hardware sales, the tablet will provide a quick and convenient way for Amazon to capture a bigger chunk of the digital media market and allow customers to buy any of its millions of offerings from almost anywhere.
The 7-inch tablet is expected to appear within the next month or so and cost just $250. Such a low price from a trusted brand like Amazon will disrupt the entire tablet market.
"A proprietary tablet would allow Amazon to widen itscompetitive moat, improve consumer experience and benefit from the rapid growth in mobile usage," Jefferies & Co.'s (NYSE: JEF) Youssef Squali wrote in a report.
Although analysts expect Amazon to make little profit from the tablet itself, its potential for selling more of its digital wares such as e-books, movies, music and Google Inc. (Nasdaq: GOOG) Android apps is boundless.
The Kindle e-reader shows how hardware can drive media sales. It has helped Amazon capture 90% of the e-book market.
The Kindle e-reader will account for 9.9% of Amazon's total revenue next year, just five years after its debut, according to Citigroup Inc. (NYSE: C) analyst Mark Mahaney. Mahaney estimates about half of that revenue, $6.1 billion, will be from sales of the device, with the other half from e-books.
An Amazon Kindle Tablet will open up multiple digital avenues of growth.
Take online video sales, for example. Amazon has just 4.2% of that market, well behind the 65.48% share of Apple Inc.'s (Nasdaq: AAPL) iTunes Store.
In terms of additional revenue, the Kindle tablet could quickly rival that of the e-reader.