Big Jumps In Amazon (AMZN) And Level 3 (LVLT) Signal Tech Hopes

Investing

Published: July 10, 2007 5:17 am

Amazon (AMZN) rose 4% yesterday on no news. So did Level 3 (LVLT). Odd that both happened on the opening day of earnings season.

Other tech firms like Google (GOOG) are also moving up and trading around their highs, but Amazon and Level 3 represent the dream of endless internet growth better than most other companies.

It is very old news that Amazon’s shares are up 100% this year. But, it is based on a wonderful assumption that may or may not be true. If Amazon builds out enough new services, it can stay ahead of the falling margins of its core e-commerce businesses in the US. With new initiatives including VOD and selling use of its huge tech platform to other enterprises, this may work. As long as the commerce engine of the internet stays strong.

Level 3’s rally is also based on the ideas that video over the internet and internet commerce in general will improving. Its massive bandwidth pipeline infrastructure can only get higher prices if demand demand keeps rising sharply. Video is the driver of that assumption. And, video use may expand forever.

Measuring video trends is not terribly hard. YouTube and digital TV growth are fair proxies. Amazon’s new ventures and Level 3 will do well if the bell weathers stay strong.

Douglas A. McIntyre can be reached at [email protected].

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