Wall Street Speculates on Reading
November 7 2009
Boston, home of the nation’s first tax-supported free public library, just had its first book festival (five years after Hawaii!), and it prompted Elyse Andrews, Editor of the Cabot Wealth Advisory, to discuss the future of reading from an investor’s point of view.
Here’s what she wrote today:
According to the news release that the Boston Book Festival put out after the event, "12,000 people took part in the panel discussions, readings, music performances and street fair, most of which were free. The event featured 90 authors and presenters, including some of the biggest names in the literary world, 40 outdoor exhibitors, 30 indoor events, children's activities and live music."
Besides the more traditional topics that you'd expect to find at a book festival, a major topic of the weekend was the future of reading. No matter how much I (or anyone else) may love the printed word, there's no denying that big changes are afoot in the publishing world.
You only need to look at the deterioration of the newspaper industry to see the effects that digital and online media have had on print-based industries. Fortunately, it seems that book lovers are trying to adapt to the changes instead of fighting them--a good strategy if they want to find a profitable and functional way to survive this revolution.
And a discussion on the future of reading would not be complete without a few words on the Kindle, Amazon.com's (AMZN) electronic-reader.
The Kindle allows readers to purchase books from the comfort of their homes and read them instantly on this small, lightweight handheld device. It can hold over 200 titles and access several newspapers and popular blogs. The Kindle doesn't use WiFi, but instead uses the same high-speed data network as advanced cell phones, so you never have to locate a hotspot to pick up the signal.
Editor Timothy Lutts wrote about Amazon in Cabot Wealth Advisory on October 26, saying this:
"Last Friday, for example, brought an awesome 27% jump in Amazon.com (AMZN), the result of a crackerjack earnings report. In short, Amazon.com is selling an enormous (but secret) number of Kindle e-book readers, and they're very profitable.
"What gets my attention is this number, $11 billion. That's the amount of value that Amazon.com's stock gained in the market on Friday, thanks to the buying of major investors. At the market close on Thursday, AMZN was judged to be worth $40 billion. Twenty-four hours later, the market said it was worth $51 billion!
"This big number tells me that some very serious investors, are projecting some terrific earnings power for Amazon.com, through both its main retail operation and its proprietary Kindle unit. Both are revolutionary. The Amazon.com Web site has already changed the world and is still increasing in its influence. And the era of the Kindle is just beginning. With newspapers and magazines shrinking and dying, Amazon.com has an enormous opportunity to become a preferred information/entertainment medium."
And that week, Editor Michael Cintolo added Amazon to the Cabot Market Letter Model Portfolio. He recently wrote this about the company:
"In 10 years, how many people do you think will be reading some of their books, newspapers, magazines and even textbooks electronically? The answer is probably in the millions or even more, and that makes Amazon's Kindle e-reader a potential blockbuster product. Plus, management has deftly positioned the company as the Walmart of the Internet, and all of this has led to accelerating growth--revenues rose 28% in the third quarter, earnings boomed 67% and, most importantly, the stock exploded 27% to new all-time highs on eight times its average volume. You don't see many earnings gaps this powerful from institutional-quality stocks, and we think it's a sign of higher prices to come."
===
Two observations:
Despite a very tough year for book publishers, the future of books and reading drove a major stock gain.
In some ways the Amazon.com success is reminiscent of Microsoft Vs. Apple. It’s Kindle e-reader is dominating the market because of its exclusive link to Amazon.com. But there are now other and possibly better, and cheaper, e-readers available, and many more in the works. Apple is rumored to be producing one.
Tags: . Apple, Add new tag, Amazon.com, AMZN, Boston Book Festival, Cabot Market Letter Model Portfolio. Microsoft, Cabot Wealth Advisory, Elyse Andrews, future of reading, Kindle, Michael Cintolo, Timothy Lutts
