Amazon.com downgraded to "reduce"

25.10.07 - AC Research

NEW YORK, October 25 (newratings.com) ? Analyst Henning Wagener of AC Research downgrades Amazon.com Inc (AMZN) from "hold" to "reduce."

According to AC Research?s research note dated October 24 and published this morning, the company has reported its 3Q07 results. In that period, Amazon.com was able to grow its sales revenues by $0.95 billion y/y to $3.26 billion. Earnings from operations more than tripled from $40 million to $123 million. At the same time, net profits improved from $19 million to $80 million, or $0.19 per share.

In all, the reported results were ahead of the estimates, the analyst mentions. In this context, the company benefited, above all, from the publishing of the last Harry Potter novel, although the book was sold with huge price reductions.

For the ongoing 4Q, Amazon.com has projected sales of $5.1-$5.45 billion and earnings from operations $221-$291 million. Amazon.com?s profit forecast is slightly short of the estimates, reconfirming the existing concerns over the company?s earnings growth prospects, the analyst says. In the not so distant past, Amazon.com was able to benefit in particular from cost cutting measures.

At Tuesday?s closing price of $100.82 and 2008 P/E ratio of about 67, the company?s stock seems to enjoy a rather ambitious rating, following the rally over the last few months. The launch of online music sales lends some support to Amazon.com?s share price. More than two million songs by more than 180,000 recording artists are made available on Amazon MP3. The analyst adds, however, that the continuing slowdown in the US economy constitutes a risk factor, adversely impacting the company?s earnings potential.

AC Research downgrades Amazon.com from "hold" to "reduce."