Amazon Facing Lower E-Commerce Spending - PJ

Piper Jaffray is lowering their revenue and EPS estimates for Amazon (Nasdaq: AMZN) due to :

1) PJ's 1Q08 eCommerce survey which suggests sluggish online spending for U.S. consumers in 2008

2) 3rd party online spending data which suggests a meaningful deterioration in eCommerce spending in Q1 and

3) low levels of consumer confidence and retail sales data.

They are also lowering interest income to account for the lower interest rate environment. For 1Q, they are lowering revenue and PF EPS from $4.13B and $0.43 to $4.0B and $0.39. 1Q revenue guidance is for $3.95-4.15B. For CY08, the firm is moving from $19.4B and $2.03 to $19.1B and $1.91. Approximately $0.06 of lower PF EPS is from the lower revenues and the other $0.06 is from lower interest income.

PJ notes that they are lowering 2008 North America revenue estimate by 3.2% vs. previous estimates. They have left International revenue estimates unchanged given the strength in the Euro (up 3% q/q in Q1 and up 5% q/q in Q2) which they expect to largely offset a slowing International consumer.

Overall, PJ's survey indicated low levels of consumer confidence. 36% of respondents indicated that they are worse off financially today vs. a year ago, 23% indicated they are better off, and 41% indicated their financial condition was the same. Looking forward, 21% of respondents indicated that they expect their financial condition to worsen over the next year, 38% expect their financial situation to improve, and 42% expect their financial condition to remain the same.

Notablecalls: I'm surprised yet again. This pretty much goes against what we heard when the stock was 20% lower. PJ's call is going to hurt AMZN today. Go short early and aggressively but don't overstay your welcome.

This is not the end yet.

The race is not for the swift, nor the battle for the strong, But time and chance happens to them all. Fate's hand falls suddenly, who can say when it falls?

Comments

[bb99]

Piper Jaffray on 1/28/08 reduced their 1st qtr EPS from $0.36 to $0.34 and the price target from $98 to $68 for Amazon. This week Piper reduce earnings again down to $0.30 from $0.34 and the price target goes up from $68 to $74? The full year estimates by Piper for Amazon during this period has also gone from $1.78 down to $1.52 (15% drop in earnings expectations!). It is interesting that over 90% of Amazon's sales consist of discretionary items such as books, CD's, movies and small electronics. As we enter this consumer-led recession aren't discretionary items the first things that comsumers cut back on by definition?.

[bb99]

Piper Jaffray on 1/28/08 reduced their 1st qtr EPS from $0.36 to $0.34 and the price target from $98 to $68 for Amazon. This week Piper reduce earnings again down to $0.30 from $0.34 and the price target goes up from $68 to $74? The full year estimates by Piper for Amazon during this period has also gone from $1.78 down to $1.52 (15% drop in earnings expectations!). It is interesting that over 90% of Amazon's earnings consist of discretionary items such as books, CD's, movies and small electronics. As we enter this consumer-led recession aren't discretionary items the first things that comsumers cut back on (by definition?).