Amazon shares fall after profit drop, modest Q3 outlook

venerdì 24 luglio 2009 19:02

   * Share drop wipes more than $3 billion off market value
 * Biggest percentage loser on S&P 500
 * Price targets raised on strong gross margins
 July 24 (Reuters) - Shares of Inc (AMZN.O: Quotazione) fell
as much as 9 percent on Friday, a day after the world's largest
online retailer posted a 10 percent decline in second-quarter
profit and gave a modest third-quarter outlook, prompting one
brokerage to downgrade the stock.
 Collins Stewart, which lowered its rating on the stock to
"hold" from "buy," said at current valuation levels it did not
see any material upside for Amazon.
 "Though our downgrade is largely based on valuation, we are
also somewhat cautious on Amazon due to the turnaround at
EBAY's Marketplace," the brokerage said in a note to clients.
 Amazon's shares have jumped more than 80 percent since the
start of 2009, outstripping main rival eBay (EBAY.O: Quotazione), as
investors have come to depend on Amazon to outpace a soft
e-commerce arena by capturing market share and launching new
categories of goods.
 On Friday afternoon the company's shares were trading down
$8.10 at $85.75 on Nasdaq, wiping more than $3 billion off the
company's market value. The stock's percentage loss was the
biggest on the S&P 500 index .SPX.
 Analysts were also concerned about weakness in Amazon's
North American business, particularly in the media category.
 "It appears the softness was driven by a decline in video
game sales, due primarily to tough comparisons. We continue to
view the transition of media from physical to digital format as
a risk for Amazon," Credit Suisse analyst S. Wang said.
 In the second quarter, the company saw flat growth in the
North American media category. While total sales rose 14
percent, they fell marginally short of estimates.
 However, at least five analysts raised their price targets
on the stock, encouraged by strength in the company's gross
margins in the quarter and on the expectation that Amazon will
continue to gain market share.
 Gross margin in the second quarter rose to 24.4 percent
from 23.8 percent a year ago, while earnings of 32 cents a
share exceeded analysts' estimates by a cent.
 "We continue to believe Amazon is well-positioned to gain
share at the expense of both online and off-line competitors by
virtue of its selection, value proposition, and convenience
factor," analysts at RBC Capital Markets said in a note to
 The following table lists the price target changes made on
 Brokerage         Price target          Rating
               New       Old
 Bernstein        $90       $74         Market Perform
 Barclays         $83       $76         Equal-Weight
 RBC              $98       $95         Outperform
 S&P Equity       $76       $72         Sell
 Credit Suisse    $80       $60         Neutral
 JP Morgan*      $108 ('10) $91 ('09)   Overweight
  * The brokerage set a target of $108 for 2010
 (Reporting by Amitha Rajan in Bangalore; Editing by Mike