Amazon (AMZN): Impact of Pending Accounting Changes - Citi

Citi analyst Mark May, reiterated his Buy rating on shares of Amazon.com (NASDAQ: AMZN) after learning 2 new pieces of information:

1) Amazon sometimes negotiates fee discounts for large 1P sellers

2) co-op ad fees are based on the wholesale price for products sold to Amazon rather than the retail price

The analyst estimates that the impact of the change in accounting standards for Co-Op Advertising:

1) increases Advertising/Other segment revenue by 40% (or $2.4bn) in 2018

2) increases Total Revenue by 1.0% or $3 billion

3) decreases Total Gross Margin by 30bps (from 37.3% to 37.0%).

Despite the large numbers, the analyst stated "this and the other accounting changes going into effect do not impact earnings" however he believes they could modestly improve sentiment and the multiple. His price target of $1250 currently implies EBITDA.

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 $1168.92 yesterday.

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