BofA cuts Amazon, says Street view for margins too high

BANGALORE Thu Jul 15, 2010 5:13pm IST

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. Wall Street's expectations for margins at Amazon.com Inc are too high, and growth at the world's largest online retailer is slipping, analysts at BofA Merrill Lynch said, cutting the company to ''neutral'' from ''buy.'' REUTERS/Rick Wilking/Files

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. Wall Street's expectations for margins at Amazon.com Inc are too high, and growth at the world's largest online retailer is slipping, analysts at BofA Merrill Lynch said, cutting the company to ''neutral'' from ''buy.''

Credit: Reuters/Rick Wilking/Files

Related Topics

BANGALORE (Reuters) - Wall Street's expectations for margins at Amazon.com Inc are too high, and growth at the world's largest online retailer is slipping, analysts at BofA Merrill Lynch said, cutting the company to "neutral" from "buy."

Shares of the company were down 2 percent at $120.5 Thursday morning before the bell.

Amazon -- which sells everything from from books to bath fixtures and also offers a host of services to businesses and Web developers -- is one of the fastest growing names in the sector.

But the analysts said beginning third quarter, they expect a material fall in growth, down as much as 28 percent by the fourth quarter after adjusting for foreign exchange rates.

"Amazon remains one of the faster growers in the Internet sector, and this is not a Kindle-sales-related downgrade," they wrote in a note to clients.

The company, which owns the highly-popular Kindle electronic reader, has been fighting a price war with Apple Inc's pricier iPad tablet computer rival and Barnes & Noble Inc's Nook e-book reader.

"We view the street estimate of $380 million in GAAP operating profit as too high," the analysts said, as they expect pressures from a competitive e-book reader market and hiring costs among other things.

They also said rising competitive pressures for the digital sector could continue to impact headcount and hiring at the company.

"We see more economic indicators trending negatively and less potential for a top-line acceleration surprise," they said.

(Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Jarshad Kakkrakandy)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Earnings Season

Earnings Season

Wipro sees rosier end to year as U.S. clients spend.  Full Article 

DLF Appeals

DLF Appeals

DLF seeks interim relief from capital market ban  Full Article 

Business Climate

Business Climate

Fears for tough penalties grow as India cleans up business  Full Article 

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

Falling Oil Prices

Falling Oil Prices

Indian consumers respond to softer oil, food prices  Full Article 

Pollution Levels

Pollution Levels

Delhi braces for worst air quality this Diwali week.  Full Article 

Book Keeping

Book Keeping

RBI fires warning shots on companies' lack of FX hedging.  Full Article 

Policy Repo Rate

Policy Repo Rate

Most external members suggested rate cut in RBI's Sept review.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage