Wal-Mart's Kindle decision a no-brainer
The store's move to stop selling the e-reader will have only a minor impact on the online retailer's revenue.
The retailer will stop carrying Kindles beyond its existing inventory and purchase commitments in hopes that consumers will be more interested in Apple's (AAPL) iPad and other gadgets.
Wal-Mart follows in the footsteps of Target (TGT), which made a similar decision in May. We expect this decision will have only a minor impact on Amazon's revenue from the Kindle, as the majority of the devices are sold directly through the company's website.
Wal-Mart's decision is a no-brainer
Wal-Mart's decision did not come as a surprise, as it was increasingly being treated as a Kindle showroom by customers. The device is integrated with Amazon's online store and makes it easy for Kindle users to shop at Amazon.com. It was evident that the increasing penetration of Kindle devices would encourage customers to spend more at Amazon.com, which offers products at competitive prices compared to Wal-Mart or Target.
Forrester Research analyst Sucharita Mulpuru, who calls the Kindle a Trojan horse in other stores outside of Amazon, believes Wal-Mart "should have made this decision a long time ago," he told Reuters. The timing of the decision ahead of the holiday season means that Wal-Mart stands to lose the holiday season sales.
Revenue from Kindle may dip in Q4
Amazon's Kindle hardware revenue and the number of devices sold may dip slightly (if at all) as a result of the move. The dip will influence the decision of prospective customers who may choose to stay loyal to Amazon and buy a Kindle device from the website or instead buy another tablet like the Apple iPad, Google Nexus or Barnes and Noble's Nook that remain available at Wal-Mart.
The good news for Amazon is that two other marketing channels, Best Buy (BBY)and RadioShack (RSH), will continue to stock the Kindle range of products. Another positive from this move is better margins from the hardware sales, provided the company is able to retain prospective customers, now with the middlemen taken out of the equation.
However, if other retailers follow suit, it may curtail Amazon's reach toward buyers who still prefer to shop at physical stores vs. online stores. With seamless connectivity to its e-store provided by the Kindle, Amazon had an opportunity to convert Kindle users into its own users. But with Wal-Mart pulling back it will be tougher for the company to do so.
We have a $222 estimate for Amazon shares, which is 15% below the current market price.
I don't care if Wal-Mart sells the Kindle or not, so bid deal for this news to me.
I can buy the Kindle online at Amazon and get free shipping, I believe a better price as wel, and it will arrive workingl....
The last 3 laptops bought at Wal-Mart all had to be returned due to defects of one sort or another, same thing with a camera. I'd swear those product stockers there play smash the the products around in the stock room.
I demand that American corporations give jobs to Americans.
I demand that American corporations stop building factories in Asia and Mexico.
I demand that Americans stop losing their homes because they can't find a job.
Oh well, it's time to get in my Japanese vehicle and go to Wal-Mart and buy more products from China, South Korea, Vietnam, Indonesia, India and Mexico.
An American Consumer
In other words, buy Amazon stock. If Walmart and Target are afraid of you, you are doing something right.
I still do most of my shopping at Amazon. The Kindle on Amazon is free shipping anything over $25 can ship with super saver shipping which is free.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
With the universe of this category in its seasonal sweet spot, these picks have tailwinds propelling them into the new year.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.