Amazon downgraded despite Kindle boost
Posted
Nov 06 2008, 02:33 PM
by
Kim Peterson
Rating:
Even Oprah's endorsement can't save Amazon this holiday, according to Citi analyst Mark Mahaney. He downgraded the stock late yesterday, saying he was concerned after seeing slowing consumer spending at other e-commerce companies. Amazon shares are down 7% today to $48.16 as a result.
Oprah revved up the stock when she praised the Kindle bookreader (pictured) on her Oct. 24 show, Mahaney wrote, but Kindle sales won't materially impact Amazon's financial results until 2010. Also in Amazon's favor is its surprisingly strong Q3 report. But Mahaney noted consumer spending concerns at companies like Expedia and Blue Nile.
Even with the downgrade, Mahaney upped his price target on the stock to $60 from $52. That's because he's now looking at expected results from 2010 instead of 2009.
I don't think it's useful to compare Amazon to Expedia or Blue Nile. You can't lump these three companies together because they sell stuff online. Blue Nile sells high-end jewelry, and luxury goods retailers are being particularly hard hit these days as people pull back on big spending. Expedia is a travel company, and is seeing softness in airline flights, car rentals and hotel sales -- none of which are Amazon's strengths.
Better to look at something like comScore's recent report on Q3 online spending, which excludes travel spending. It says that online spending is still growing, though not at the high rates seen earlier this year. The e-commerce category grew by 6% in the quarter, down from the 12% to 13% growth rates seen earlier in the year.
A comScore analyst said that online retailers might actually benefit in the current economic crisis, because people are going to be scouring the Web for deals this holiday.
Amazon's own prediction for the fourth quarter was a bit of a disappointment for analysts. The company said last month its holiday quarter sales would be between $6 billion and $7 billion, less than the $7.1 billion Wall Street was anticipating.
A year ago, Amazon's fourth quarter sales were $5.67 billion.
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