Amazon's 'Fire' Could Spark Its Stock: Citi Analyst
Special to CNBC.com
Apple won't lose any sleep from Amazon's entry into the tablet computer market, but the new "Fire" tablet may put a spark into the online company's stock, Citigroup Internet analyst Mark Mahaney told CNBC.
"It can help the company’s fundamentals and, therefore, can help the stock," said Mahaney, who has had a "buy" rating on Amazon for two years with a $280 price target on the stock.
Based on Citi's research he believes "there is a 75 million unit tablet market next year." While it's not known yet if Amazon has the right product, $199 is the right price point, he said, and since the company has the right content it "could take 10 percent market share. This could be a winner for them."
Amazon unveiled its Fire tablet, as well as the newest iteration of its bestselling Kindle e-reader Wednesday. According to Citi research, Apple has about 60 percent to 70 percent of the tablet market with its iPad.
The analyst said there might be an impact on Amazon earnings because it won't make money on the "first couple of million of these devices that they sell. The question is how much they’ll actually lose."
Amazon's advantage, he said, is it is able to subsidize the Fire through its other ecommerce products, as more people shop online. "It's really a consumer play," he said. "People want a tablet, but they want it below $300."
Mahaney has no such reservations about the newest nontouch version of the Kindle, priced at $79. Amazon has 65 percent of the e-reader market, he said, and the company has made the model less clunky and cheaper every six months.
"This will be a major gift item in this fourth quarter," Mahaney said. Amazon is expected to sell 20 million e-readers and "I bet that number’s gonna be 25 million to 30 million units next year," he said.
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Mark Mahaney does not own Amazon shares but Citi has received compensation for noninvestment banking services within the past year.