Needham & Company Remains Sidelined on Amazon.com (AMZN) Following Mixed 3Q
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Needham & Company reiterated a Hold rating on Amazon.com (NASDAQ: AMZN) following the company's 3Q earnings report. AMZN reported revenue of $32.7B, in-line with consensus. CSOI margin, or non-GAAP operating income margin was 4.2%, increasing y/y from 3.9%, but decreasing q/q from 6.9%, a significant pullback from the previous three quarters of consecutive margin improvement.
Analyst Kerry Rice commented, "Amazon posted mixed Q3 results with in-line revenue and lower-than-expected CSOI and Q4 revenue and operating profit guidance were below consensus. While AWS continued to scale operating margin, the company's investment step-up in digital content and fulfillment centers weighed on the overall CSOI margin. Going forward, we expect margin pressure to linger as the 23 new FCs built in 2H16 layer on additional operating costs and as the company continues to invest heavily in digital content, AWS, Echo, Alexa, and India expansion. While we expect Amazon to extend its e-commerce market share during the upcoming holiday season as the expanded Prime product selection should propel strong paid unit growth, we remain cautious given the likely ongoing pressure on profitability."
Shares of Amazon.com closed at $818.36 yesterday.
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