Amazon: Respectable, But Guidance Hurts

Amazon.com had a respectable quarter, but lower guidance is hurting the company's shares. Industry-leading sales and market-share growth mean it's still the king of online retail, but even that won't help when shoppers simply start to spend less—almost $1 billion less in 2008 for Amazon.

For 2008, Amazon expects revenue between $18.46 billion and $19.46 billion. The top end of its previous estimate range was $20.1 billion. Wall Street had been hoping for $19.5 billion. Amazon shares were off almost 6 percent at midday Thursday.

Analysts react:

ThinkPanure cut its price target to $70 but says it's still a buy:

Amazon's sales momentum has continued astoundingly stronger than e-commerce, in our view, and much stronger than retail, too. But e-commerce momentum has fallen off dramatically all year and now it appears that the e-commerce pneumonia has begun to give Amazon just a hint of the sniffles.

Goldman Sachs points to head winds from foreign exchange for part of the revenue hit:

We would be buyers of Amazon stock on weakness given FX changes exaggerate the extent of its revenue slowdown and given we view Amazon as a structural share taker with continuing strong free cash generation. The FX impact of switching to a -5% hit from a +1% benefit to revenue explains half of the 4Q2008 revenue guidance reduction. We previously forecast ~22% constant currency revenue growth in 4Q2008, and Amazon guided to ~20%.

Goldman cut its earnings estimates as follows: 2008 down 5 percent to $1.83; 2009 down 15 percent to $2.07; 2010 down 18 percent to $2.60. It lowered its six-month price target from $93 to $60.

Standard & Poor's still says it's a buy on valuation, despite the slowdown:

Given expected weakness in consumer spending and a projected headwind from forex, we are lowering our '08 and '09 operating EPS estimates to $1.35 and $1.63, from $1.41 and $1.77. We are also cutting our DCF-based 12-month target price by $5 to $62. However, we think the shares are now attractive after a severe decline so far in '08, as we think market-share gains will lead to significant long-term operating margin improvement.

The report is bad news all around, as Amazon heads into the all-important holiday season. Bloomberg notes the fourth quarter made up 43 percent of Amazon's annual profit last year. Shares may look cheap, but if shoppers stop spending, nobody is safe.

Comments

[sforce:]

Not cheap at all. Look at the new earnings estimates, and do the math:

finance.yahoo.com/q/ae...

2008 Oct 24 03:12 PM