Amazon a leader in mixed media


As earnings season kicked into high gear last month, some new-media shares tanked while others rocketed higher.

In the latter category was Inc., which rose a hefty 54.1%, much of that coming at the tail end of the month once the company posted blowout quarterly earnings.

Amazon reported a 32% increase in revenue to $3.02 billion in the first quarter, with $1.99 billion coming from its "media" category, a 26% rise.

After the earnings report, analysts who had been bearish about shares, such as Cowen & Co., Piper Jaffray and Citigroup, upgraded the stock.

But analysts who had been bullish on Amazon, like Stifel Nicolaus, recommending that investors buy shares, switched to a "hold" recommendation shortly after the earnings sent shares soaring.

Bear Stearns analysts suggested that Amazon's success could bode well for DVR pioneer TiVo Inc. because Amazon's Unbox digital service delivers movies and TV shows on-demand to TV sets via broadband-enabled TiVo boxes.

While Amazon declined to disclose user metrics for Unbox, arguing it's too early. "We understand that the number of downloads to date have been significantly higher than the 3,000 figure that Wal-Mart recently disclosed for its competing service," Bear Stearns said.

TiVo, however, rose an anemic 0.9% last month.

Another winner was Apple Inc., shares of which rose 6.9%, also spurred by a better-than-expected quarterly earnings report.

Late in the month, Bear Stearns issued a lengthy take on Apple TV, the new product that allows iTunes users to enjoy their content on TV screens.

While Bear Stearns concludes that Apple TV is not a perfect substitute for cable or satellite TV, it adds that it could be "the beginning of the much heralded (and over-hyped) convergence of the TV and the PC."

It predicts the adoption rate of Apple TV will be somewhere between that of TiVo and satellite TV.

At the lower, TiVo end of the scale, Apple TV boxes would be in about 41,000 U.S. households by year's end, growing to 3.6 million in 2012. At the higher, satellite TV end, Apple TV boxes would be in the neighborhood of 200,000 U.S. homes at year's end and growing to more than 10 million in 2012.

But Bear Stearns notes that its information technology group is more bullish on Apple TV, forecasting that about 1 million units will be shipped this year, based on its assumption that about 2% of iPod owners will want the product.

Downside movers last month included Sirius Satellite Radio, off 7.5%, and possible merger partner XM Satellite Radio, down 9.4%.

Shares of both reacted positively, though briefly, to a midmonth rumor that CBS Corp. might be interested in acquiring one company or the other. "If true, this would not be the first time that radio pondered teaming with the enemy," said Wedbush Morgan Securities analyst William Kidd, noting that Clear Channel Communications has invested in XM in the past.

"We think it's plausible that a radio player could look at satellite radio defensively," Kidd said, adding there's less than a 50% likelihood of approval for the XM-Sirius merger. But because the price of Sirius has been knocked down so much since the merger plans were announced, he suggests buying shares.

"At some point, which could be as soon as July or August, the merger overhang is likely to go away, as the merger will either be approved with concessions or denied," Kidd said.

Yahoo! Inc. also lost ground last month, with shares sinking 10.4% on another unimpressive earnings report. Google, on the other hand, beat earnings expectations and its stock rose 2.9%.

Netflix Inc. received an upgrade from Bank of America analyst Brian Pitz from "sell" to "neutral" last month, though the stock sank 4.4%.

Netflix shares have been sinking most of the year, reflecting concerns that Blockbuster Inc. has suddenly become formidable competition to the company that invented the subscription DVD-by-mail industry.