The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.



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(AMZN) - Get Report

recently reported in its first-quarter earnings a 38% jump in revenues.

However, net income declined 32% because of higher shipping, marketing and technology costs. Most of Amazon's value comes from its traditional online retail sales, in which it competes with


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We have a current price estimate of $199 for Amazon's stock, which is roughly in line with market price.

Amazon's higher sales were driven by increased inventory, selection of products and continued efforts to reduce prices. Promotional efforts, like lower shipping rates, were also a factor. Amazon's North American sales grew 45% in the first quarter compared to a year ago, along with 31% in international sales growth.

International sales were hurt by a decline in unit sales in Japan in the wake of the tragic earthquake on March 11. We expect international sales to continue growing as Japan recovers and could account for more than 50% of Amazon's sales over the long term.

Sales Costs Increasing

Offers like free shipping have the ability to pump up unit sales. However, the downside effect is an increase in shipping costs to Amazon, which can drag operating margins over the near term.

However, the long-term picture looks a bit different. Higher sales volumes, improved operating efficiency and better terms from suppliers should raise operating margins in the years ahead.

See our full analysis for Amazon's stock


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