The time-honored practice of guesstimating sales of electronic gizmos is a complex business.
Reflecting upon yesterday’s disclosure by Amazon.com (AMZN) that it has been selling Kindle e-book readers and tablets at a rate exceeding a million units for each of the last three weeks, Cowen & Co.’s Jim Friedland and Goldman Sachs’s Heather Bellini today came up with fairly different conclusions: One sees downside, the other upside, though neither seems upset with Amazon.
Friedland reiterates an Outperform rating even though the 11 million number appears to be below his own estimate for 14.9 million Kindle devices to be sold. He thinks the disparity reflects the difficulty of forecasting demand rather than a slowdown in Kindle “enthusiasm.”
The Amazon press release indicates that the Fire and traditional ereader sales have strong momentum in the holiday season. However, the trend is below our current estimates. Based on the release, we think Amazon is tracking toward 11.0 million Kindle devices for Q4:11, made up of 3.5 million Kindle Fires and 7.5 million Kindle E-readers. This compares to our current estimate of 14.9 million total Kindle devices, including 4.5 million Kindle Fires and 10.4 million Kindle ereaders.
Bellini, on the other hand, who has a Hold rating on Amazon shares, thinks the number is actually tracking above 11 million at more like 14 million:
While we believe the company intentionally provides too little information to be able to back into a shipments number for the quarter, we triangulate from today�s and previous press releases to come up with our best estimate. For example, management had stated that orders for eReaders in the first 3 weeks post the September 28 launch were double that of the previous launch. From this we estimate 2mn eReaders were sold in October and we think assuming 1mn Fires sold over this time is fair (for 3mn total). Interpreting today�s comment to imply 1.5mn devices per week for the previous 3 weeks and our assumption that this rate could continue for the rest of the year, we see 7.5mn units in the last 5 weeks of the quarter. Thus, excluding the first 26 days of November (which includes Black Friday), we estimate 10.5mn devices were sold. Including Black Friday (where the company noted 4x as many Kindles were sold than last year), then the other 25 days would have to contribute roughly 3mn to reach our 14mn unit estimate for the quarter. This implies 120K a day (or 840K on a weekly basis) for the better part of November, which we believe is reasonable.
If the number does indeed come closer to 14 million, that could make Bellini’s estimate for $18.6 billion in revenue in the quarter too low, she writes.
Amazon shares today closed down 26 cents at $181.26.
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