Investors are concerned about Amazon's profitability

Some industry analyst and experts say Amazon's stock is overvalued.
By Ian Marsh | Nov 19, 2015
Some on Wall Street wonder if Amazon Inc. may have bitten off more than it can chew. After an unusually busy first half of the year that saw the online retailer spend on developing everything from mobile phones and Hollywood-style production to grocery deliveries, investors are ready to see it curtail its ambitions and start delivering sustainable profits.

A July 26 CNBC Money Control news report describes differences in opinions among industry analysts on what course Amazon should should take on investments and being more profitable. Some investors want quicker returns and others believe in ever-increasing investments over the long haul.

"It does get frustrating when they continue to spend quarter after quarter and they don't let the revenue flow through, " said Michael Scanlon, who manages $3.5 billion at Manulife Asset Management and holds shares of Amazon. "I'm definitely ready for profits."

While Needham & Co's analyst Kerry Rice says, "You have to take a long-term perspective and you have to buy in that you're going to see solid topline growth".

CNBC Money Control reported on July 24 that Amazon reported its largest quarterly loss since 2012 late last week as operating expenses rose 24 percent, led by a 40 percent surge in spending on technology and content. Its shares fell 9.6 percent on July 25, wiping out about $16 billion of value. The company has now fallen short of Wall Street's earnings expectations in seven of the past nine quarters. Investors say they are concerned about not only Amazon spending every dollar that comes in the door but also the lack of disclosure about where it is being spent.

According to Thomson Reuters StarMine, Amazon's shares carry an intrinsic worth of $36.37 or about a tenth of its current price making the stock one of the most overvalued names in its universe of more than 4,000 U.S. companies.


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