Amazon.com (AMZN) is one of the largest online retailers in the world. However, recent growth initiatives have significantly increased the cost structure and related revenue streams appear uncertain as of now.
Consequently, we have lowered our EPS estimates for the rest of the year. Moreover, competition remains a primary concern, with a corresponding negative impact on prices, which also has the potential to hurt margins and cash flow.
Therefore, although we believe in the high growth profile of the core business, Amazon’s market position, international success and very strong balance sheet, we expect downward pressure on the shares. Consequently, we are downgrading AMZN shares to Underperform.