Analyst Previews Amazon's Q4 Earnings; Sees 'Material' Guide Down, Reiterates Sell (AMZN)

Broadpoint.AmTech is out with a research note previewing Amazon.com's (Nasdaq: AMZN) Q4 earnings, which are expected out Thursday, January 29th, after the market closes. The firm reiterates its Sell rating and $35 price target.

The firm believes Amazon will report generally in-line Q4 results: AmTech sees Q4 sales coming in at $6.5 billion, with EPS of $0.39. At the same time, the firm believes Amazon will issue concerning Q1 and FY09 outlooks. Broadpoint.AmTech is currently expecting Q1 sales guidance of $4.1 billion, which compares to the Street estimate of $4.6 billion, and FY09 sales of $19.8 billion, versus the Street consensus of $21.2 billion.

The AmTech analyst believes that Amazon "entered a negative leverage cycle in 4Q08 and that this cycle will persist through at least the first half of 2009." Further, the firm sees Amazon reporting pressure on its gross margin given "retail price wars and/or general deflationary trends..." In contrast, the report notes that Amazon could offset tightening margins "by reining in its Tech & Content spend."

AmTech points out that Amazon currently trades at 39x its forward consensus EPS estimate, which places it at a "whopping 144% premium, on average, to Apple (Nasdaq: AAPL) (17x), Research In Motion (Nasdaq: RIMM) (15x), and Google (Nasdaq: GOOG) (15x)", the other Four Horsemen of Tech. The firm said it "cannot identify a single fundamental justification for this valuation gap." Yeessh.

With shares of Amazon trading down 2.4% to around $48.41 today, AmTech's $35 price target represents potential downside of nearly 28% from current levels.

You May Also Be Interested In

• Google (GOOGL) Makes Structural Changes to AI Teams to Quicken Progress: CEO
• Itau BBA Reiterates Outperform Rating on WEG S.A. (WEGE3:BZ) (WEGZY)
• Badger Meter (BMI) PT Raised to $175 at Stifel