My Stock Winners

Dow, Nasdaq Finish Lower As Investors Grow More Uneasy About Economy. The stock market found little to assuage concerns in minutes from the Fed’s last meeting, released during afternoon trading. The major indexes’ losses steepened after investors parsed the minutes for signs of a possible cut in interest rates.

But don;t you worry. This only kills high flying stocks such as AMZN

Let’s say AMZN’s revenue grows 30% in ‘08, and 20% in ‘09, ‘10 and ‘11. I think that is extremely aggressive. Growing top line from such a large number.”

Let’s examine what this poster might mean by “such a large number”.

Isn’t the largeness of numbers pretty relative, and simply based on our own mostly brick and mortar experiences and perceptions about what is feasible or possible, i.e., enterprises like Target Stores circa 1991 tended to grow from a base (revenues of 16B) similar to Amazon by next years estimate at only about 10% per annum?

Target Stores
Revenue Growth
FY 92: 11.2%
FY 93: 7.3%
FY 94: 10.7%

But Target’s conditions for growth in a physical, landbased environment were different from the online marketplace in a number of ways. For example, you need more time and capital to build out a brick and mortar enterprise, that and the fact that the customer base, a subset of the population, is just not growing that fast anyway, even if you did not have those limitations.

The population Target was drawing from was probably not growing too much more than 1.1% per annum, but the population Amazon will be drawing from will be growing at a rate of 6x that much:

“JupiterResearch says the worldwide online population will increase at a compound annual growth rate of 6.6 percent during the next five years, far outpacing the 1.1 percent compound annual growth rate for the planet’s population as a whole.”

So if we couple this 6x factor with Target’s 1990’s growth rate of 10% we get a growth ceiling of about 60% per year for online retail between now and 2011.

Seen from that perspective perhaps the consensus 25% revenue, so far less than that 60% is a more conservative figure that some think. And one that already incorporates the slower economy and is based on Amazon’s most affluent customer segments. Meaning that when economies pick up 35-40% growth would not out of the question.

AMZN=30 in 1 monh