Amazon (AMZN) shares are getting hammered in early trading, dropping more than 9 percent after analysts raised concerns about the company’s softer profit outlook and rising costs. The early consensus was that the Seattle-based company posted solid results. In fact, Amazon’s revenue in Q1’14 increased 23%, y/y, to $19.7 billion, yielding EPS of $0.23. The Street’s expectation was for revenue of $19.42 billion and EPS of $0.21.
But despite Amazon’s Q1 double digit revenue increase, according to Reuters, at least 13 analysts cut their AMZN price targets after the e-commerce giant reported a 23% increase in operating expenses. Fulfillment costs and technology and content spending rose as well, coming in at 29% and 44%, respectively.[via Reuters] “The continued significant investment cycle is not showing any signs of letting up … ,” Raymond James analysts said in a note. The brokerage cut its rating on the stock to “outperform” from “strong buy”.
“Amazon is throwing a lot out there to try to drive growth,” BofA Merrill Lynch (BAC) analysts wrote in a note. The firm cut its price target on the stock to $420 from $435, citing lower comparable multiples in the sector.”
Reuters’ report notes that among the 14 brokerage research notes seen by the publication, only Cantor Fitzgerald raised its PT on the stock – from $415 to $425 per share, suggesting a possible upside of more than 26% from the company’s current PPS.
Cantor said that while Amazon is spending big on a range of projects, including developing its own original shows and video games, these investments would result in “outsized growth and further market share gains” in the future.
Amazon fell as much as 9 percent, one of the worst performers on the S&P 500, and was last down 8.36 percent to $309.38 at 2:12 p.m.
h/t Business Insider