Analysts Debate: Is Amazon The 'Prophet Of No Profit'?
Another quarterly report for Amazon (NASDAQ: AMZN), another sell-off. Shares were off more than 10 percent Friday after the company posted a net loss wider than expectations.
Similar sell-offs accompanied reports in April and January, when Slate.com dubbed Amazon CEO Jeff Bezos "The Prophet of No Profit."
Revenue growth have historically bid up shares in the 20-year-old company, driven by investments in new business like its recently launched Fire Phone. But when it comes to earnings, it appears investors are starting to get religion.
Back in April, UBS' Eric J. Sheridan told the New York Times that “with Amazon you've had a cult investor group that believed that all that matters is revenue growth.”
Sheridan cut his rating in April from Buy to Neutral, and on Friday said in a note the company is in a "tug of war" with itself over investments versus profits.
Citi's Mark May downgraded Amazon Tuesday ahead of its recent earnings report, primarily because "investors are becoming less forgiving."
May is Neutral with a target of $358.
Even those rooting for the company, like Jefferies' Brian Pitz, now mention the "P" word. "Amazon keeps investing for growth, and that will further delay profitability," Pitz said in a note, reiterating a Buy but cutting his target from $450 to to $435.
Maintaining a Hold, Canaccord's Michael Graham said Friday that Amazon's long-term prospects are excellent, "but difficulty in predicting investor sentiment about predictably low margins leaves us on the sidelines for now."
Graham cut his target from $365 to to $360.
Yet Deutsche Bank's Ross Sandler maintained his Buy rating and said that where other investors struggle with Amazon's perennial lack of profits, he sees "a paradigm shift."
"If we look globally" at Amazon's peer group, there just isn't a lot of profits out there," Sandler said in a note Friday.
"Amazon is the best-positioned in the Western world to win," Sandler said. "We are once again reducing our estimates and maintaining a Buy, which admittedly sounds like a broken record."
Amazon traded recently at $318.96, down 11.05 percent.
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