-->AMZN is down 9.6% at a 14 month low in the premarket
Amazon.com: Color on Quarter
- Needham notes Amazon missed rev and operating income expectations for 3Q14 and Q4 guidance. While overall GMV growth trended lower, they believe investors should find solace in the acceleration of 3P GMV growth. The slower growth was primarily due to a shift towards digital goods and sluggish international markets. Despite heading towards the holidays, they expect these trends to persist, offsetting the solid 3P GMV growth and leaving the slowing overall GMV growth trend intact. Gross margin continued to improve, which they expect to occur again in Q4. While large technology, content, and fulfillment investments may be necessary for long-term growth, they believe investors are fatigued by the severity of the loss and lack of profitability given the current revenue growth rate; Hold.
- Oppenheimer lowers their AMZN tgt to $372 from $415 on lower long-term estimates for Media, which is seeing materially slower growth; despite weaker 3Q gross profit and 4Q guidance, driven by the Fire Phone write-off. Excluding this charge, eCommerce GP/customer increased a healthy 10% y/y vs. +11% in 1H14. AWS growth accelerated q/q, and should grow sequentially in 4Q. Mgmt blamed weaker Media on less aggressive discounting vs. last year and shift in textbooks to rentals. They also believe that a larger Prime library is resulting in fewer media purchases. Decreasing '14E SOI by 5%, '15E largely unchanged.
- Topeka Capital Markets lowers their AMZN tgt to $350 from $395. Amazon's 3Q14 revenues were slightly below their estimates while CSOI was better than they modeled, perhaps even better ex-the Fire Phone valuation costs. The sharp deceleration in media growth is concerning and is a trend they will monitor. 4Q CSOI guidance implies a return to profitability levels in the +3% range if Amazon exceeds guidance. For them, 1Q15 guidance (with 4Q results) will be critical in assessing their view of the stock next year. Amazon will need to show that its investments since the start of this cycle will produce returns.
- RBC Capital Mkts lowers their AMZN tgt to $420 from $435; AMZN remains a Very Aggressive Investor - China market expansion, Devices (Fire), Fresh (Groceries), Faster Delivery, Consumer Staples, and Video Content. They continue to view most of these as logical, with the possible exception of some of the Devices spend. The super-aggressive investment outlook may well make AMZN a 2015 Long, but they'll be patient. They highly doubt that all these investments won't pay off in the form of eventual revenue growth reacceleration AND eventual margin expansion.
- Janney downgraded AMZN to Neutral
- Cowen downgraded AMZN to Mkt Perform; tgt to $325