Amazon.com had a respectable quarter, but lower guidance is hurting the company's shares today. Industry-leading sales and market-share growth mean it's still the king of online retail, but even that won't help when shoppers simply start to spend less—almost $1 billion less in 2008 for Amazon.
For 2008, Amazon expects revenue between $18.46 billion and $19.46 billion. The top end of its previous estimate range was $20.1 billion. Wall Street had been hoping for $19.5 billion. Amazon shares were off almost 6 percent at midday.
ThinkPanure cut its price target to $70 but says it's still a buy:
Amazon's sales momentum has continued astoundingly stronger than e-commerce, in our view, and much stronger than retail, too. But e-commerce momentum has fallen off dramatically all year and now it appears that the e-commerce pneumonia has begun to give Amazon just a hint of the sniffles.
Goldman Sachs points to head winds from foreign exchange for part of the revenue hit:
We would be buyers of Amazon stock on weakness given FX changes exaggerate the extent of its revenue slowdown and given we view Amazon as a structural share taker with continuing strong free cash generation. The FX impact of switching to a -5% hit from a +1% benefit to revenue explains half of the 4Q2008 revenue guidance reduction. We previously forecast ~22% constant currency revenue growth in 4Q2008, and Amazon guided to ~20%.
Goldman cut its earnings estimates as follows: 2008 down 5 percent to $1.83; 2009 down 15 percent to $2.07; 2010 down 18 percent to $2.60. It lowered its six-month price target from $93 to $60.
Standard & Poor's still says it's a buy on valuation, despite the slowdown:
Given expected weakness in consumer spending and a projected headwind from forex, we are lowering our '08 and '09 operating EPS estimates to $1.35 and $1.63, from $1.41 and $1.77. We are also cutting our DCF-based 12-month target price by $5 to $62. However, we think the shares are now attractive after a severe decline so far in '08, as we think market-share gains will lead to significant long-term operating margin improvement.
The report is bad news all around, as Amazon heads into the all-important holiday season. Bloomberg notes the fourth quarter made up 43 percent of Amazon's annual profit last year. Shares may look cheap, but if shoppers stop spending, nobody is safe.