Analysts Cool to Amazon Q4 Projections

Amazon.com (Nasdaq: AMZN) issued a preliminary report Monday about its fourth-quarter performance that showed holiday sales were not strong enough to power results past Wall Street estimates, reportedly prompting analysts at three securities firms to downgrade the stock.

The Seattle, Washington-based e-tailer said Monday it expects net sales for the fourth quarter to top US$960 million, up 40 percent over the $676 million registered in the year-earlier quarter. However, that figurefalls at the low end of analysts’ reported sales forecasts of $950 million to $1.05 billion.

Salomon Smith Barney reportedly downgraded Amazon shares to outperform from buy, while Goldman Sachs was said to have lowered its rating on the company to market outperform from trading buy.

Robertson Stephens lowered Amazon to market performer from long-term attractive, reports said, and Credit Suisse First Boston, while maintaining a buy rating, was said to have cut its 12-month price target for Amazon to $45 from $60.

Nonetheless, despite trading at a loss early Tuesday morning, Amazon shares ended up gaining $1.44, or 9.6 percent, to close the day at $16.38.

Operating Loss Narrows

Gross profit for the quarter for Amazon will be more than $210 million, up some 140 percent, while the pro forma operating loss amounts to less than 7 percent of net sales, the company said in a statement issued after the close of trading Monday.

“This holiday season, customers purchased record amounts from our electronics, kitchen and tools stores,” Amazon chief executive officer Jeff Bezos said, adding that more than 35 percent of the online giant’s U.S. customers bought items other than books, music and videos.

In the 1999 fourth quarter, the pro forma operating loss totaled 26 percent of net sales.

The company did not provide a forecast for its net loss. Analysts are looking for the company to lose 26 cents per share, according to First Call/Thompson Financial.

Slow Consumer Spending

While not as strong as analysts expected, the numbers are in line with previous company projections. In October, Amazon reported a third-quarter operating loss of $68 million, or 28 cents per share, as sales rose 79 percent from a year earlier.

At the same time, the company predicted sales for all of 2001 to reach $4 billion, with operating losses totaling less than 5 percent of sales.

“We’re pleased that during a period of broad softening in consumer spending, we delivered sales within our guidance, and at the same time met our bottom-line objectives,” said Warren Jenson, the company’s chief financial officer.

Jenson said Amazon is entering the new year “in a solid financial position,” with about $1.1 billion in cash and marketable securities and an inventory balance at year’s end of less than $175 million.

Holiday Sales

Holiday e-tail surveys found Amazon.com ranked No. 1 among online stores. According to Nielsen//NetRatings, the e-tailer and partner Toys ‘R’ Us saw more than five times the number of visitors as their closest competitor, eToys, during the holiday shopping season.

Amazon said it will report results after the close of trading on January 30th.