By Scott Moritz, TheStreet

 

The Kindle's rise has lifted Amazon (AMZN) to a buy rating at Collins Stewart.

 

After a 10% slide in the stock in the past month, Collins Stewart analyst Sandeep Aggarwal upgraded the stock to buy, citing the Kindle's strength in the all-important e-book sector. Aggarwal estimates that Amazon will sell 3.85 million Kindles this year. If that turns out to be true, Amazon would have a profit of $650 million on $2.5 billion in sales.

 

The electronic reader sector is starting to heat up. Last month, Apple (AAPL) introduced its iPad tablet. Last week,  Google (GOOG) was rumored to be entering the race with a "gPad"-friendly operating system and this week, Barnes & Noble (BKS) has stocked up on its Nook e-reader devices.

 

 

Amazon bulls say Kindle's dominance among e-books, while challenged by upstarts, will likely continue as the category takes off with consumers.

 

Bing: More on E-Readers

 

Call it an iTunes-like effect. Aggarwal says most of the $649 spent by the average Kindle user a year will come from digital books, media subscriptions and accessories. "Kindle revenue is not limited to unit shipment," Aggarwal says. Amazon will sell about $400 in products beyond the $259 Kindle price, Aggarwal estimates.

 

It also won't hurt that the Kindle is likely to be upgraded with a color screen soon, says Aggarwal, noting that the device represents up to 8% of total Amazon sales.

 

Last week, the New York Times reported that Amazon purchased touch screen specialist Touchco, a move that presumably puts Kindle on track for more advanced display technology.

 

Amazon shares have climbed 79% in the past year, doubling the Nasdaq’s 35% advance.

 

Related Articles

 

Google enters the tablet fray

 

For Apple, it’s a Macworld after all

 

Another day, another Apple product launch