(Bloomberg) — Amazon.com Inc. shares are lower after the company forecast a potential quarterly loss for the first time in two years, a reminder to investors that its reshaping of the worlds of retailing and cloud-computing industry doesn’t come without a cost.
The company on Thursday said it’s boosting spending on new warehouses to meet growing e-commerce demand, data centers for its Amazon Web Services division, video programming to keep customers engaged and gadgets like the Echo line of voice-activated speakers to stay on the cutting edge of the emerging smart-home market. This comes after shares hit all time highs Thursday, briefly making Jeff Bezos the richest man in the world.
While analysts remain optimistic about the future of the e-commerce giant and growing revenue, the report underscored the high cost of its business model. Here’s a roundup of what Wall Street is saying.
Goldman Sachs Group Inc., Heath Terry
“We continue to believe that we are in the early stages of the shift of compute to the cloud and the transition of traditional retail online and that the market is underestimating the long-term financial impact of both to Amazon. As Amazon continues to generate high cash returns on cash invested despite the growing scale of its investments, with significant option value in early stage efforts in AI, Voice, and robotics, we believe growth acceleration like that we saw in second quarter is likely to continue, in contrast with consensus estimates.”
Jefferies Group LLC, Brian Fitzgerald
“Amazon delivered a strong print despite heavy investment to support growth. Revenue came in ahead of consensus and high end of guidance while operating income was below consensus. Margin guidance came in below expectations on unfavorable currency exchange and continued investment in India, fulfillment, digital content, and Amazon Web Services (AWS). Unit and revenue growth accelerated in the quarter on strong Prime membership growth while AWS delivered solid revenue growth of 42 percent year-over-year. We reiterate our Buy and raise our price target to $1,250.”
Cantor Fitzgerald LP, Kip Paulson
“We’re reiterating our Overweight rating, increasing our price target to $1,150 from $1,050, and raising our estimates to reflect another impressive quarter, with net sales growth accelerating to 26 percent and with solid guidance that assumes a continuation of 20-28 percent growth in the third quarter, partially offset by aggressive investments in fulfillment capacity, headcount, video content, AWS, and other areas.”
Credit Suisse Group AG, Stephen Ju
“Despite the operating profit shortfall in 2Q17, the better than- expected revenue as well as the broad-based acceleration across all of its operating segments in our view validates the company’s rationale to continue investing…We maintain our Outperform rating and our updated investment thesis for Amazon shares is predicated on the following longer-term factors: 1) re-establishment of e-commerce segment operating margin expansion, 2) ongoing margin benefit due to shipping loss moderation, and 3) upward bias to AWS revenueforecasts.”
Citigroup Inc., Mark May
“We view the second quarter results as supportive of the long-term prospects for Amazon, given the resilience of AWS to pricing changes and accelerating growth in the retail business. Our earnings numbers are being revised lower in the near-term, however, to reflect the higher level of investment.”
Amazon has 38 buy ratings, five holds and one sell with an average 12-month price target of $1,142, according to data compiled by Bloomberg. Shares closed Thursday at $1,046.
