COMMENTARY -- Henry Blodget evidently has too much time on his hands, but at least he seems to have a sense of humor.
Prevailing market sentiments don't leave much for tech research houses these days. Do all the fundamental analysis you want, but if Wall Street insists on worrying about tech earnings, dot-com meltdowns and presidential elections, not even the most detailed research report will sway people's minds.
Perhaps that's what Blodget, Merrill Lynch's well-known Internet analyst, figured when he decided to write a note about the latest feature from Amazon.com (Nasdaq: AMZN).
The online retailer yesterday debuted a "Holiday Delight-O-meter" listing the total number of items sold by Amazon.com since Nov. 2. "The Delight-o-meter will be updated frequently and is a demonstration of Amazon.com’s ability to delight millions of customers this holiday season," the company says.
Don't try to extrapolate revenue from it, Amazon.com added.
To which Blodget said: Yeah, right.
"We would be remiss in our duties, of course, if we did not attempt to use the Holiday Delight-O-Meter as a Holiday Revenue-O-Meter (even though the press release expressly cautions against doing so)," the analyst writes.
Given that not-so-respectful tone, I'd have to believe Blodget's tongue was somewhere in his cheek as he described the Delight-O-Meter:
"In our opinion, the Delight-O-Meter will encourage repeat visits to the Amazon site, as it will (modestly) increase the sense of community, activity, and excitement surrounding the site during the holidays. One of the most important features of web-page design is dynamism ... The Delight-O-Meter will likely have a similar psychological marketing impact: it will encourage users to participate, to contribute, to get in on the action."
And how does this psychology translate into revenue? No one knows, but it does provide a way for Blodget to estimate the company's fourth quarter progress.
Blodget figures Amazon.com booked $200 million to $250 million in October sales (basically one-third of the third quarter's $600 million in sales, with a little added because of the stronger season). He further guesses that Amazon.com's average revenue-per-unit is $25.
Multiplying $25 by the current Delight-O-Meter figure (7,120,920 as of 1:41 p.m. ET) yields a little more than $178 million. Add that to Blodget's October estimate, and you can suppose Amazon.com sold roughly $400 million of product.
That's a solid performance from the viewpoint of the Merrill Lynch analyst, who predicts $1 billion in fourth quarter revenue for Amazon.com. Blodget believes the company needs $750 million from the holiday season to reach the 10-figure revenue mark; if his guess is correct, Amazon.com is already more than halfway there, with half of the holiday season remaining.
How seriously should you take this? Not very.
Anyone reading this probably knows Amazon.com generates strong revenue growth for a retailer. The more important questions for investors at this point concern cash flows, profits, expenses and losses. Blodget does not pretend to address those.
Even if revenue were all that mattered, the analyst admits his report is based on "back-of-the-envelope" calculations. His guess at the company's average revenue-per-unit stems from average order size ($45) and the price range of the company's entire product line ($10 to $1,500). It's hardly what you would call a detailed forecast.
But it makes for a bit of fun reading, which makes it more worthwhile than almost all the other research produced on Wall Street these days. If it sounds a tad ridiculous, don't blame Blodget -- he's not the one who decided to measure Delight. 22GO>