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AUGUST 11, 2003
Brawny at Amazon 
Once again, Amazon.com (AMZN
) is roiling the Street: Critics of this online book, music, and video giant are quick to pan the stock as overpriced -- at 47 times 2004 forecast earnings of 85 cents a share. Bulls, however, reckon that with Amazon finally making money, the jump to 40 from 12 a year ago is justified -- with more to come. So says Bill Harnisch of Forstmann-Leff-Peconic Partners, featured here on Oct. 14, 2002, when the stock was at 17. He had snapped up Amazon as it crashed to 8 on Sept. 17, 2001 (the stock was at 113 in 1999). He bought more this year at 37, after Amazon posted strong second-quarter results and raised its forecasts. Says Harnisch: "I get more enthusiastic as I look at the numbers." Profits are up -- on surging sales and low operating-expense growth. And Amazon has huge free cash flow, which Harnisch puts at $430 million, or $1.03 a share, by yearend 2003; at $642 million, or $1.13, in 2004; and $642 million, or $1.54, in 2005. With Amazon's estimated yearly profit growth of 40%, Harnisch sees the stock at 60 in a year. But if Amazon pays off its costly $2 billion debt, as he expects, earnings will get a boost and kick the price to 65. Mary Meeker of Morgan Stanley (MWD
), who rates Amazon "overweight," has raised her estimates: to 54 cents a share in 2003 on sales of $5.04 billion, to 84 cents in 2004 on $5.9 billion, and $1.21 in 2005 on $6.8 billion. Unit sales are up sharply, reinforcing Amazon's strategy, says Meeker, who owns shares. Her bullish calls on Amazon in the 1990s stirred controversy. Morgan Stanley aims to do banking for Amazon.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.  By Gene G. Marcial
BW MALL
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