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  • skunkthrone skunkthrone Feb 1, 2010 11:43 PM Flag

    Wall Street's Thoughts On Amazon

    February 1, 2010

    # Kaufman Bros: "Believe sell-off on new digital pricing for Macmillan is an overreaction... Pricing change would likely help profits even with some share losses...We continue to believe eBooks/Kindle will be a niche product vs. mass market product (i.e., iPod) and Amazon is biggest share gainer for physical book sales...Believe convenience is just as important as price for eBooks." Maintains Buy rating, $160 price target.

    # Piper Jaffray: "We believe Amazon's capitulation to Macmillan that will force Amazon to adopt an agency model in which it allows all publishers to set the price of their digital books is a positive for eBook margins and profitability, but creates a competitive headwind for the Kindle over the medium-term. We expect Amazon's gross margins on eBooks whose price is set by the publisher to be in the 20- 25% (of retail price) range versus 0% or negative previously, but it threatens Amazon's Kindle strategy of being a low-cost eReader. Bottom line, we believe today's move in shares is an overreaction to the publisher news, and the Amazon story is about much more than digital books." Maintains Overweight rating, $172 price target.

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