Not sure why is it selling off after a decent Quarter. Margins are improving. Only worry
seem to be mobile penetration.
Chinese ADRs are highly manipulated. BIDU, a year back saw double bottom around 80-85 from 135-145.
Stephen #$%$, Credit Suisse (Outperform, $395 PT)
Ongoing investments into its many initiatives including AWS and geo expansion masked the gross margin expansion benefits in its retail business which was 239bp (less $170mm in Fire Phone write downs vs 226bp in 2Q14 and 175bp in 1Q14). AMZN continues to reap the benefits from fulfillment center maturation and shipping fee savings given closer proximity to its user base. As we do not believe management's discipline around investments has changed over the years, we remain buyers of AMZN shares and maintain our Outperform rating especially as it remains out of favor as the aforementioned margin expansion in its core retail franchise is strong evidence of its ability to deliver long-term shareholder value creation.
Heath Terry, Goldman Sachs (Buy, $360 PT)
Amazon reported 3Q revenue of $20.6bn (+20.4% yoy vs. +23.2% in 2Q), at the midpoint of guidance but below consensus at $20.8bn. Adjusted op. income margin was -0.7%, below consensus at 0.0% on a $170mn Fire Phone inventory write-down. Ex-FX revenue growth decelerated to +20% from +22% in 2Q as NA media decelerated ~9pp on a tougher comp and the shift from textbook sales to rentals, while international growth slowed due in part to the Japanese consumption tax increase. 4Q revenue guidance of $27.3-$30.3bn was below consensus of $30.9bn while GAAP op. income guidance of $(570)-$430mn compared to consensus of $454.2mn. Despite these issues operating cash flow was $1.8bn, +27% yoy. We remain CL-Buy as we believe the investments in infrastructure currently pressuring margins will payoff in the form of additional market share gains and continued high returns on invested capital.
Jason Helfstein, Oppeneheimer (Outperform, $372 PT)
We are maintaining our Outperform rating, despite weaker 3Q gross profit and 4Q guidance, driven by the Fire Phone write-off. Excluding this charge, eCommerce GP/customer increased a healthy 10% y/y vs. +11% in 1H14. US EGM accelerated, while Int'l EGM growth was roughly the same, ex currency. Lastly, AWS growth accelerated q/q, and should grow sequentially in 4Q. However, we are decreasing our target to $372 from $415 on lower long-term estimates for Media, which is seeing materially slower growth. Management blamed weaker Media on less aggressive discounting vs. last year and shift in textbooks to rentals. We also believe that a larger Prime library is resulting in fewer media purchases. Decreasing '14E SOI by 5%, '15E largely unchanged.
Chad Bartley, Pacific Crest Securities (Outperform, $435 PT)
Results were disappointing, but much less so excluding the Fire phone. We are buyers of AMZN on weakness due to the relatively strong Q4 guidance, after adjusting for currency, and our new outlook for nearly stable operating margin in 2015.