Amazon Stock Surges This Week, Fueled By Growing E-Book Market

Amazon’s (NASDAQ:AMZN) shares rose an impressive 4 percent on Tuesday, following a note written by Morgan Stanley’s Scott Devitt on his projections of the growing e-book market.

Devitt’s initial estimate of e-book sales was 567 million; however, that number was revised Tuesday to some 859 million for 2012. According to Devitt via Reuters, Amazon’s sales likely counted for about 383 million of those sales. This number represents Amazon’s 45 percent share of the e-book market.

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Devitt quoted some recent data provided by Amazon, stating that based on studies, readers were shown to read about 4.6 times more after purchasing an e-reading device than before the purchase. Amazon’s strategy has been to market the devices themselves at near cost, and rely on e-book sales and other apps to make up the profit gap — a strategy, that according to Mr. Devitt, has been working…

Scott Devitt’s note to investors and analysts is attributed to the bump in Amazon’s stock, but it should be remembered that Devitt’s initial projections for the company were somewhat off base. Early in the year, he anticipated a 30 percent annual growth for Amazon over the next three years, although following the reported earnings (which missed his previous forecast by a billion dollars or so), he cut his predictions to 20 percent per year, down by a full third of his original anticipated growth.

According to sources, Forrester Research predicts that e-book sales will approach $1 billion in the near future — and expand to over $13 billion by 2017. Such tremendous growth in a market where Amazon holds nearly half the market share will almost certainly bring good tidings to the company. The company experienced 70 percent year over year growth between 2011 and 2012 in the e-book category.

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However, the news isn’t good across the board — Barnes & Noble (NYSE:BKS) has reported that it expects sales of its e-reader, the Nook, to decrease in 2013, compared to 2012. The struggling retail book giant also anticipates a loss, reinforcing the idea that people are moving away from paper-based books in exchange for their digital counterparts, and that not all e-readers are created equal. Barnes & Noble is scheduled to release its third-quarter results on February 28.

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