Wall Street awaits Amazon's analyst meeting
Analysts seem to be eagerly anticipating their meeting with Amazon.com, saying they expect the online retailer to be upbeat about its prospects for profitability.
Amazon is scheduled to meet with analysts Tuesday. In several research reports, analysts said they expected the stock to rally leading up to the meeting. Shares were up 41 cents to $17.10 in early trading. Analysts, however, noted that Amazon isn't expected to make any big business revisions.
"The stock could rally into and through the meeting, particularly as the company does appear to be making material improvements," wrote ABN AMRO analyst Arthur Newman. But he added "we do not expect any major revelations."
Indeed, most analysts are expecting the company to reiterate previously stated goals of reaching a breakeven on an operating basis by the fourth quarter.
Analysts are also hoping to get some answers from the company to questions raised about its financial picture.
The New York Society of Security Analysts has hosted forums on Amazon, criticizing the financial information doled out to investors. Forum participants have also argued that Amazon's board doesn't have enough experience.
CEO Jeff Bezos tried to address those concerns at a shareholders' meeting last month, saying Amazon was considering expanding its board.
But while the company has its critics, a few analysts are looking to this year as "the turning point" for the company.
"We think results will largely get better from here for Amazon, with continuing improvements in margins via productivity savings and operating leverage while meeting top-line estimates," wrote Goldman Sachs analyst Anthony Noto.
Noto said Amazon has been trimming its fulfillment and marketing costs on a per-order basis. While the company netted $3.27 per order in the first quarter, he expects to see that figure increase to $4.74 per order by the end of the year, lowering the amount of orders it needs to cover its fixed costs, and boosting its chances of profitability.
And Amazon could benefit from new partnerships with offline businesses, wrote Deutsche Bank analyst Jeetil Patel. Amazon recently launched a baby products store as part of its partnership with Toys "R" Us.
"While the business is still not without risk (given the tough e-commerce and economic environments) we feel that Amazon will be one of the few consumer e-commerce brands left standing once small industry participants disappear in the next 9 to 12 months," he wrote.
But not everyone was so upbeat; ABN AMRO's Newman noted that Amazon "still needs to make tremendous strides" to meet its operating profit goals.
"Notwithstanding the near-term focus on breakeven and liquidity," he wrote, "we see a longer-term issue--can Amazon achieve a level of profitability commensurate with its market capitalization and debt level? In our view, the answer is far from clear."
Newman added that based on his calculations, the company is only worth about $10 a share.