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Top 3 Tech Stocks for 2013

Amazon looks a good bet for investors in 2013 as the online retailer continues its upward trajectory.

"Although they have had a very, very good year, they have some momentum behind them," said Sica, who has a small position in Amazon. "I think that they have such a good platform and I don't really see online commerce declining -- I see it advancing."

Online retail sales are expected to grow 13.5% in 2013, according to recent research from FTI Consulting, surpassing $250 billion. That number is expected to top $460 billion in 2020.

Set against this backdrop, Amazon continues to grow revenue at an impressive rate. The company's third-quarter sales climbed 27% year-over-year to reach $13.81 billion, boosted by a 36% hike in its Electronics and other General Merchandise (EGM) segment. Amazon's media revenue, which includes books, electronic content, DVDs and music, increased 11% compared to the prior year's quarter.

An established holiday season and back-to-school heavyweight, Amazon's also perfectly positioned for a tough economy, as consumers seek out efficient comparison shopping.

Crucially, the company is also harnessing the mobile device explosion, recently launching the latest version of its popular Amazon Mobile app for iOS devices, which can notify consumers when a products ships and is delivered. The app also offers daily notifications on Amazon's Lightning Deals.

The Seattle-based company is also making progress with its Kindle Fire devices, which are chipping away at the market share of Apple's iPad in the tablet space, according to tech research giant IDC.

The Kindle e-reader and Kindle Fire tablet, however, primarily bring consumers closer to Amazon's content and offerings such as its Amazon Prime shipping service.

From Wine to Web Services, Amazon has a bewildering (and constantly growing) array of services in its portfolio, as the company seeks to expand its top line. Amazon's even playing in the alternative TV market, where its Instant Video is gaining share from market leader Netflix (NFLX), according to ChangeWave Research.

Like most big retailers, though, Amazon's profit margins remain thin. The company's third-quarter earnings recently came in below Wall Street's expectations; not that analysts were concerned. Evercore Partners' Ken Sena recently added Amazon to the firm's "Conviction Buy List," citing the potential for Amazon Web Services (AWS) to deliver higher margins.

A set of cloud-based services ranging from enterprise and mobile applications to big data and social games, AWS's growth is outpacing the industry, according to Sena, who predicts a 45% compound annual growth rate from 2012 to 2018.

The analyst also sees retailer traction on Amazon's marketplace and the rollout of new distribution centers, which is nearing completion, as good news for margins.

Sica cites Amazon's trailblazing status as key to its success, as well the ease with which consumers can use its many services. "They have some competitive advantages -- they were first in and they developed [their platform] to be very convenient," he said. "They are very geared towards the consumer, which is critical."

Amazon shares have gained more than 39% this year, far outpacing the Nasdaq's 13.48% gain.
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