Amazon: Was That Its Bottom?

Did Amazon.com (AMZN) shares just hit rock bottom?

Amazon shares suffered a double-digit percentage loss in after hours trading last night on the company’s sobering forecast for the holiday shopping season. The shares are still trading below their pre-announcement level, but have bounced nicely off their lows, as investors attempt to pick a bottom for the beleaguered e-tailing giant.

The short version of what happened is this: Amazon told the Street that Q4 revenue would be between $6 billion and $7 billion. Even the high end of the range would be a bit below the consensus, but the low end would be an unmitigated disaster. But some analysts think the company is being far too cautious, despite the weakening macro economy. Here’s a sampler of some of this morning’s thoughts from the Street on what to do with AMZN:

• Michael Souers, Standard & Poor’s: He raised his rating on the stock this morning to Buy from Hold. He cut ‘08 EPS to $1.35 from $1.63, and trimmed ‘09 to $1.41, from $1.77. He also reduced his price target on the stock to $62, from $67. But he says that “the shares are now attractive after a severe decline,” and that “market-share gains will lead to significant long-term operating improvement.”
• Tim Boyd, American Technology Research: He upgraded the stock to Neutral from Sell, while lowering his target to $40 from $45. He also cut his ‘08 EPS estimate to $1.39 from $1.43, slicing ‘09 to $1.53, from $1.68. “It is the kind of stock that investors will want to own for the long-term at the right price,” he writes, but advises not to start nibbling or covering shorts until the stock drops to $30.
• Jeffrey Lindsay, Bernstein Research: He maintains an Outperform rating on the shares, while trimming his target to $71 from $83; his EPS estimates are now $1.50 for this year and $1.74 for next year, down from $1.60 and $2.13. He says that the low end of the company’s guidance for Q4, which would mean a 46% drop in EBIT, “is unrealistically pessimistic even in today’s environment.”
• Mark Mahaney, Citigroup: He maintains a Buy rating, but cut his price target to $62 from $93. He now sees EPS of $1.38 this year and $1.50 next year, down from $1.49 and $1.79.
• Matt Nemer, Thomas Weisel Partners: He maintains a Market Weight rating, and cautions that “slower growth will remind investors that Amazon is not immune, which could bring further erosion to the earnings and cash flow multiple.”
• Justin Post, Merrill Lynch: Still Neutral. “At this point, recession impact on Amazon is no surprise, but we remain hesitant to get more aggressive now as wide Q4 guidance may expose the stock to macro-consumer data points, and these are likely trending negative in Q4.”
• Mark Meeker, Morgan Stanley: Maintains Overweight rating. “If consumers resume spending in 2009 - as we assume they will - AMZN shares should prove attractive at these levels.”

Amazon is down $3.03, or 6.1%, to $46.96. For the year, the stock is down 49%.

Comments

[jcrash:]

No.

2008 Oct 23 11:49 AM

[stox2buy:]

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2008 Oct 23 12:40 PM

[kris23:]

No doubt Amazon is not recession proof. I'm not exactly sure consumers will 'resume spending in 2009' as I think a lot of people will still be cautious as feelings of 08 linger. As for AMZN, maybe it was a bottom, but I think it will be a longgggg time before they ever recover any of the 49% loss.

2008 Oct 23 12:43 PM

[DC Housing ...:]

Do people actually still listen to anything analysts have to say about stocks? Will we ever learn? Here is a refersher from last year:

seekingalpha.com/artic...

You have to be the stupidest person on earth to still think that any of these morons have ANY idea what direction of ANY stock will be in ANY time frame when they can't even tell where the S&P is going AT ALL.

What a completely worthless post.

2008 Oct 23 02:04 PM

[User 265729:]

I'm speaking here as a consumer...No position in AMZN...

I've always been happy with the service I've received from Amazon.com from their start, until now. They've had a few problems now and again, but I enjoy using their service. I can't say the same for eBay, that started out good, then took a bad turn for the worse when they said to hell with their customers.

As long as Amazon.com provided the excellent support, as they have been, I think they'll get through this in the end. That's not to say the road ahead won't be rocky -- that's a no brainer... I'd like to think of myself as a typical consumer and I'm very pleased with the services Amazon.com offers.

My opinion in the for what it's worth department....

Was this the bottom for Amazon in terms of stocks? Highly doubtful, but on the bright side, everything is being wiped-out across the board. So I think there will be an "equalizing effect" in so far as everybody will be taking a big hit and I think Amazon.com will survive. Maybe different... But AMZN will survive...

NOTE: I've seen some comments about "recession proof." I see a depression coming on... I've seen prices that were once high, totally retreating due to demand destruction, but still no buyers...

2008 Oct 23 02:19 PM

[User 265729:]

DC Housing Bear:

No. I haven't listen to them in years. Now we are finding out (via Congressional hearings), what many long suspected, that the ratings agencies were sleeping with the corporations. It is all part of the great sham that's been going on for the last 15-20 years. We are living in a "virtual economy," but now we are getting a dose of reality -- and the dose will get bigger and may kill us. Phony ratings for phony corporations with phony paper investments... Wow! Formula for The Greater Depression 2008. None of the fixes that Bush-Paulson, G-7, G-20, etc. will work -- they've all grown to actually believe their own lies. It's pathetic.

2008 Oct 23 02:27 PM

[David Tsao:]

DC Housing Bear,

Do you remember Mark Mahaney's call on AMZN back at the start of the year? It was in the 100's. He also predicted increasing operating margins for 2008.

2008 Oct 23 08:21 PM