UPDATE: Citi Downgrades Amazon (AMZN) to Neutral

(Updated - July 22, 2014 9:07 AM EDT)

Citi downgraded Amazon.com (NASDAQ: AMZN) from Buy to Neutral with a price target of $395 (from $414). Analyst Mark May thinks investors have become less forgiving.

"Consensus ests have Amazon’s 3Q14 and 4Q14 CSOI margins increasing y/y despite the significant AWS price cut on 4/1/14 that we believe is the primary cause of 2Q14 margins declining 50-150bp y/y. We believe this impact will likely persist for at least 2-3 quarters and we are lowering our 2H14 CSOI forecasts, which are now 18% below consensus. This causes our target to decline to $395 from $414," said May.

"While we believe that the core retail business is performing well and posting solid revenue growth and bottom-line leverage, we believe earnings and the stock could remain under pressure during this period of aggressive investment in AWS as many investors have become frustrated by AMZN’s lack of leverage (continued aggressive investment) and lack of transparency. As such, plus the stock’s 18% 52-wk gain, we are downgrading to Neutral from Buy," he added.

For an analyst ratings summary and ratings history on Amazon.com click here. For more ratings news on Amazon.com click here.

Shares of Amazon.com closed at $359.76 yesterday.

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