AmTech analyst Tim Boyd takes the other side of the Amazon debate, initiating with a SELL. He professes his love for the stock long-term–it’s a “must-own!”–but for now he’s urging clients to shovel it out the door. Tim’s logic:
- Amazon’s the world’s greatest retailer…but it’s still a retailer.
- Despite the likelihood of outstanding 4Q07 results, uncertainty surrounding the state of the U.S. consumer will force AMZN to provide very conservative 2008 guidance.
- EBAY is getting ready to strike back competitively, and that may force AMZN to ramp its 2008 Marketing and Tech & Content spending more than the market anticipates.
- AMZN may have to factor some third-party seller weakness into its guidance.
- Cash operating margins will rise in 2008, but the rate of improvement will slow substantially.
- AMZN’s 54x 2008 P/E does not reflect any of this.
Fair enough. As we said a couple of weeks back, when Citi’s Mark Mahaney shook up the country club by upgrading Amazon to BUY, we woudn’t be quick to pounce on the stock at the end of the holiday season catalyst in the face of a possible economic collapse, especially at this multiple.
But don’t go thinking Boyd is pessimistic about Amazon’s long term potential! On the contrary:
Let us be clear – AMZN is a must-own stock for the long-term. In our view, AMZN is on its way to becoming a $100 billion company by the middle of the next decade at the latest. We simply believe that a much better entry point is on the way. Our $69 price target is 28x our 2009 non-GAAP EPS estimate of $2.50 and 13x our 2009 EBITDA per share estimate of $4.60 (adjusting for $7 in estimated YE09 cash per share).
See Also: Amazon (AMZN): Buy Now!
Disclosure: Henry Blodget has a long-term position in Amazon.
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