) but analysts sent it into time out after it recently missed on
second quarter earnings. This Zacks Rank #5 (Strong Sell) saw a
loss in the quarter leaving many to ask: when will Amazon make
Amazon.com has its hands in many businesses. It is one of the
Internet's largest retailers, a media company with publishing and
video content, and a technology company with tablets, e-readers and
cloud, among other things.
The company really can't be labeled in one category anymore. It is
certainly more than just a book seller.
Big Second Quarter Miss
The company reported second quarter earnings on July 25 and missed
the Zacks Consensus by 6 cents. It was expected to make $0.04 but
posted a net loss of $7 million, or $0.02 per share.
Revenue rose 22% to $15.7 billion on strength in North America,
especially in shoes and apparel and health and beauty. Customers
are using the Prime program to buy items they once might have
purchased at the local drugstore. Europe, however, remains weak.
Analysts Slash Estimates
Amazon provided mixed third quarter guidance but that didn't stop
analysts from cutting full year guidance. If you look at the price
and consensus chart over the last few years, you can see that the
analysts always start out each year very optimistic about Amazon's
prospects. They clearly think that THIS is the year Amazon will
fulfill its earnings potential.
But as the year goes on, the estimates are slashed. That's why the
consensus falls, instead of climbs, every year.
2013 is now following this same pattern, mainly due to concerns
about increased spending on technology and infrastructure.
The 2013 Zacks Consensus has fallen 43 cents since the earnings
miss to $0.92 from $1.35 as 21 out of 26 estimates have been
When that many estimates are cut by that big of an amount, the
company is likely to fall to a Zacks #5 (Strong Sell), as we are
seeing with Amazon now.
Growth Is Still There
However, the analysts still see strong growth in 2013. Earnings are
expected to jump 227%.
In the last few years, it has been investing in its infrastructure,
including a big increase in its distribution network. The company
recently announced it was hiring an additional 5,000 workers at
various fulfillment distribution centers across the United States.
But with shares soaring to new highs in recent sessions, Amazon now
has a nose bleed level P/E of 330. And questions still remain as to
when all the investment will finally pay off in the form of
The Zacks Rank is a short term recommendation of 1 to 3 months.
Short term investors might be better served to check out other
Internet retailers such as
) which are both Zacks Rank #2 (Buy) stocks. For those interested
in the content business,
) is a Zacks Rank #3 (Hold).
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