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Amazon (NASDAQ: AMZN) seemed to be the poster child for the dot-com bubble. The company had a slightly goofy leader and a business plan that seemed to be created out of thin air. During the peak of the net rally, Amazon exploded in value. When the market crashed, so did AMZN.
But behind the hype was a real business that has been slowly flexing its muscles out of those ashes.
The key to the Amazon story is the company's ability to sell product cheaply -- even more cheaply than Wal-Mart (NYSE: WMT). Without the huge expense of store leases, AMZN has been able to beat competitors on price -- the average price of its products fell 8% in the fourth quarter of 2008. And sales of its Kindle book reader have met with rave reviews -- Oprah declared the online reader device her new favorite gadget, which can't be hurting sales.
As the economy recovers, I expect AMZN to be a leader. I rate the stock an A or Strong Buy.
But don't think all online bookstores are making money. In stark contrast to AMZN, Borders (NYSE: BGP) and its expensive retail space is a dying business.
Next: Online retail stock #2.
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