Amazon.com (Nasdaq: AMZN) picked up 74 U.S. cents to $14.77 in morning trading Tuesday, after Goldman Sachs analyst Anthony Noto reiterated a market outperfrom rating on the stock.
Amazon said earlier this month that its loss for the first quarter ended March 31st would be narrower than previously thought, due to strong electronics sales.
Seattle, Washington-based Amazon predicted a pro forma loss of less than US$50 million, or 22 cents per share. The e-tailer also repeated its pledge to post a profit this year.
After a tough first quarter, "results should get better," Noto wrote in a research note. A pickup in inventory turnover and "increasing visibility of profitability" will drive the stock higher, he wrote, adding that at current prices, the shares provide a favorable risk/reward ratio.
First-quarter comparisons with last year are "difficult," wrote Noto, "given that early 2000 was a vastly different environment, in which e-commerce was still a heady sector." Comparisons will "get better" as the year progresses, the analyst wrote.
In addition, the company's new agreement with Borders will prove "extremely advantageous," Noto wrote. The deal, announced April 11th, calls for Amazon to manage the book chain's online operations.
Amazon, according to Noto, can use its technological expertise, customer base and brand awareness to create similar alliances that "allow it to accelerate progress in existing categories or enter new categories at little incremental cost."
Apparel and travel, he wrote, "are two 'must-have' categories." According to Noto, airline site Orbitz, which is set to launch this summer, "would be an interesting travel partner."
In addition, Noto wrote that "Amazon is positioned to launch several new categories in international markets to help drive additional growth and continue to build awareness of international markets launched late in 2000." Amazon opened sites in France and Japan late last year.
Amazon plans to report first-quarter results after the close of trading on
April 24th.
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