Retail

Analyst Sees Amazon Margin Woes Continuing in 2015

24/7 Wall St. has been critical of Amazon.com Inc. (NASDAQ: AMZN) due to Jeff Bezos trying to run its growth ambitions at a level that feels more like nonprofit status than a corporation with shareholders.

Canaccord Genuity’s Michael Graham and Austin Moldow are also concerned with Amazon’s lack of care toward its margins, which is now expected to continue in 2015. As a result, Canaccord Genuity reiterated a Hold rating for Amazon and lowered its price target to $300 from $310.

The analysts are predicting a 17% gain in revenue for the fourth quarter. The data imply that Amazon got off to a strong start in the fourth quarter but then faded from there. Data points from other retailers suggest that early promotional activity likely pulled some purchase activity sooner in the quarter.

Considering Amazon’s margin structure, there is little reason to believe that management will have an incentive to change significantly its four-year streak of managing the business to a break-even level. The expansion of the gross margin should be slowing down. Sales and marketing has been a huge negative variance over the past few years, but at the same time may have the highest potential for improvement.

The brokerage firm also noted that Amazon trades at 1.4 times forward revenue, which is very close to trough levels — excluding 2008 — of roughly 1.2 times. As such, Canaccord Genuity sees limited downside risk for the stock. There is an increasingly negative sentiment towards low-earnings stocks in the group and an absence of top-line acceleration. Ultimately margin improvement will be needed to get this stock back in the game, in the medium-term.

ALSO READ: 6 Top Internet and Digital Media Stocks to Buy for 2015

Amazon is expected to report its fourth-quarter earnings between January 28 and February 2. Thomson Reuters has consensus estimates of $0.18 in earnings per share and $29.75 billion in revenue. In the same period of the previous year, Amazon reported $0.51 in earnings per share and $25.59 in revenue.

Shares of Amazon were up roughly 1.5% at $299.88 in the noon hour. The stock has a consensus analyst price target of $357.16 and a 52-week trading range of $284.00 to $408.06.

100 Million Americans Are Missing This Crucial Retirement Tool

The thought of burdening your family with a financial disaster is most Americans’ nightmare. However, recent studies show that over 100 million Americans still don’t have proper life insurance in the event they pass away.

Life insurance can bring peace of mind – ensuring your loved ones are safeguarded against unforeseen expenses and debts. With premiums often lower than expected and a variety of plans tailored to different life stages and health conditions, securing a policy is more accessible than ever.

A quick, no-obligation quote can provide valuable insight into what’s available and what might best suit your family’s needs. Life insurance is a simple step you can take today to help secure peace of mind for your loved ones tomorrow.

Click here to learn how to get a quote in just a few minutes.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.

AI Portfolio

Discover Our Top AI Stocks

Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.

You can follow him investing $500,000 of his own money on our top AI stocks for free.