Amazon: Recession? What Recession?

If we’re in a recession, you wouldn’t know it from looking at Amazon.com’s (AMZN) June quarter results.

Amazon shares were up sharply in an otherwise ugly market Thursday morning, propelled onward by some gushing post-earnings commentary from the Street. The key points: The company’s revenue in the June quarter actually accelerated from the March quarter, despite a weakening economy. Some analysts credit Amazon for this; other say it suggests increased consumer reliance on online shopping. Skeptics think Amazon can’t hold off economic pressures forever, and the bears think the stock is simply too expensive. But clearly, today belongs to the Amazon longs.

Here’s a quick rundown on some of the morning commentary on the stock:

• Colin Sebastian, Lazard: “We are encouraged by the ongoing strong sales trends at Amazon, and continue to believe that e-commerce should perform comparatively well in a tougher consumer environment.”
• Steve Weinstein, Pacific Crest: He raised 2008 and 2009 estimates, “based on momentum and expectations for further share gains.” Weinstein maintains a Sector Perform rating, and says that “the shares look reasonable” at 33x estimated 2009 EPS.
• Douglas Anmuth, Lehman: “Results were good but we continue to think Amazon shares are fairly valued in the mid-70s.”
• Jeffrey Lindsay, Bernstein Research: “An outstanding quarter for Amazon given extraordinarily low levels of consumer confidence in the U.S. and the U.K.”
• Mary Meeker, Morgan Stanley: “We would continue to be buyers of AMZN shares” on continuing shift of retail to online from offline, with AMZN benefiting from best-in-class user experience and a superior value proposition for consumers and sellers.
• Brian Pitz and Brian Fitzgerald, Bank of America: “Once again, the topline growth was impressive and accelerated across geographies and verticals amidst international and category expansion.” Repeats Buy rating.
• Scott Devitt, Stifel Nicolaus: “Amazon reported acceleration despite a terrible environment for retail in its largest markets…the best positioned company we follow.”
• Mark Mahaney, Citigroup: “A classic Amazon playbook quarter…extremely strong revenue growth driven by robust unit metrics, which in turn are driven by a superior customer value proposition leading to excess market share gains.”
• Stephen Ju, RBC Capital: “Despite a difficult operating environment, AMZN continues to execute well, with revenue growth re-accelerating in Q2 to 35% on an FX-adjusted basis from Q1’s 31%.”
• Michael Souers, Standard & Poor’s: He actually cut estimates, “on expected gross margin contraction caused by strength in the international segment and a mix shift.” He maintains a Hold rating and $82 price target.
• Tim Boyd, American Technology Research: “AMZN’s top-line growth is certainly remarkable considering the difficulty economic backdrop, but growth in [the second half[ is slated to come at a much higher cost than anyone expected…we expect consumer spending to be weaker in the back half of the year and believe that the risk of top- and/or bottom-line shortfalls from AMZN are higher than they were in the [first half].”
• Imran Khan, J.P. Morgan: “We think future profitability remains a concern and reiterate our Neutral rating as we see limited upside despite strong sales growth.”

Comments

[JohnPseudonym]

Amazon is up because eBay is slowing killing itself.

Approximately 1 in 30 listings at eBay are from Buy.com

Mostly Chinese junk that I can buy anywhere at the same or lower price.

I've stopped selling and buying at eBay.

I've started shopping more at Amazon and Overstock.

Both companies offer a far better online "buyer experience" than the eBay.

Sell your eBay stock before it's too late!

[gabeborenstein]

Let's not argue what is but what lies ahead .Amazon and many emerging market economies have been beneficiaries of the high commodity prices.
In turn high commodity prices are function of a massive and unprecedented commodity speculation .
As the deceleration in the U.S Economy continues it will gradually impact global economies.The global deceleration will turn into unprecedented economic implosion.This implosion will cause a record decline in the commodity prices sending the emerging market economies into the dark ages .Europe will follow as well. In the period ahead we should have another evaluation of the Amazon dynamics as they turn into shambles.U.S continues to be global locomotive which sets the global economic trends .The abysmal performance today is
about to turn into a mega recovery primarily driven by the massive dollar inflows function of pending economic implosion outside American borders (Amazon will not escape the contraction).In the meantime the U.S economy which has delerated but is not in recession ,will attain above the trend growth (record)in the period ahead . Recession is defined as two consecutive quarterly GDP declines. Major issues facing U.S economy are being addressed by the FED and the Treasury ,where as problems facing emerging economies ,including "Amazon" ,are being deflected.
I am sure that for a while longer we will hear hear about the economic miracles in the emerging market economies .This is a prelude to a massive economic collapse in the area enhanced by the record per capita debt and social unrest to follow .
The U.S,for all of the wrong reasons will thrive.
As the U.S stock market reaches record high in the period ahead ,we revisit Amazon economy then ,likely in recession.
I have predicted the current events more than two years ago in an interview (Bloomberg) ,I have reiterated the dangers on September 18 ,2007(bloomberg tv).I will be right on this call but the market volatility wil continue.

[gabeborenstein]

I just want to see If anyone has read the article above .It is a joke .Let's relax a bit and laugh for change.

[stills]

So maybe we should not micro-analyze economics, recession and the stock market. For me it is as simple as I can shop a wide variety of products without spending $4.09 a gallon for gas to drive all over looking for what I may not get any cheaper than Amazon. And just when I find I am happy with the price, I get free shipping to boot...DUH!

[Brian O]

if you retards would actually read the details of the earnings release you would see they actually missed earnings by 2 cents.

Confusion over an unexpected $53 million gain from an asset sale caused Amazon shares to zigzag in after-hours trading following the results announcement on Wednesday.

Earnings of 37 cents in the second quarter beat Wall Street's average estimate of 26 cents per share. Excluding the gain, however, earnings beat analysts' expectations by only 2 cents.

But when accounting for a lower-than-expected tax rate that boosted results in the quarter, Amazon's earnings came in two cents below Wall Street's consensus, at 24 cents, according to two analysts, including Boyd."

[MartinLowenthal]

I wrote in Nov twice that this is what would occur. See it all at www.lompie.blogspot.co... or Trading, Investing and a look into the future.

[dumb money76]

This is a joke. I can't tell if the author seriously believes that the kindle note that came out the other day is really a justification for the price of AMZN or if he is just pumping it for some other reason.

If you did the research you would see:

1) The analyst that increased his projections on the kindle did not have any access to real numbers. Instead, he based it on a leak to a tech blog. However, what he didn't realize is that the number leaked was the number of kindles shipped to AMZN.

2) Even if his very aggressive projections do hold, he is forcasting another $200 million in REVENUE, not profit, for AMZN over the next 3 years. That news translated into a runup of AMZN on monday that equaled $3 billion in market cap. I think that info is already more than priced in to the price.

3) AMZN has one of the most ridiculous priced stocks aroud:

GOOG
Trailing P/E (ttm, intraday): 33.27
Forward P/E (fye 31-Dec-09) 1: 20.96
PEG Ratio (5 yr expected): 0.85

AAPL
Trailing P/E (ttm, intraday): 35.03
Forward P/E (fye 29-Sep-09) 1: 29.62
PEG Ratio (5 yr expected): 1.39

WMT
Trailing P/E (ttm, intraday): 18.32
Forward P/E (fye 31-Jan-10) 1: 15.22
PEG Ratio (5 yr expected): 1.41

AMZN
Trailing P/E (ttm, intraday): 64.23
Forward P/E (fye 31-Dec-09) 1: 41.46
PEG Ratio (5 yr expected): 2.17

Tell me how AMZN can justify that premium. In reality AMZN's number should be more like
Wall Mart's because it is still a retailer, but even if you give it a tech companies multiples, its still about twice as expensive as it should be.

If you follow this advice and dump all the money you have into AMZN stock, you will be buying into an unsustainable bubble.