Amazon.com founder and chief executive Jeff Bezos trimmed his stake in the world's biggest online retailer on New Year's Eve, a regulatory filing showed today, a day after it reported quarterly results.
The chief executive's stake came down to 19.5 per cent as of December 31st, 2010, from 21.2 per cent.
Yesterday's results showed profit margins at the company were sliding, worrying investors and sending its shares down 9 per cent. Amazon shares fell about 8 per cent to $169 today before markets opened.
At least two brokerages cut their price targets on the company's stock, while two others raised them, but most stuck to their top ratings.
"Owning the stock here requires trust and patience. We have seen Amazon go through investment cycles before and believe investment in growth is the right long-term strategy for the internet," BofA Merrill Lynch said in a note.
Amazon said last year that it was spending on 13 new distribution centers, and yesterday it said that more would
follow.
The cost to bring those to full productivity would weigh on short-term margin, the company said.
"We expect the company to continue to invest in increasing capacity to match growth," analyst Imran Khan at JP Morgan said as he lowered his fiscal 2011 pro forma operating margin estimates to 5.6 per cent from 6.2 per cent.
The company posted a slight dip in operating profit for the holiday fourth quarter despite revenue rising 36 per cent, signaling the high cost of staying competitive in the highly promotional retail environment.
Mr Khan, however, expects margin pressures to ease in the second half of the year.
Analyst James Mitchell of Goldman Sachs recommended investors buy Amazon, as valuations are still attractive.
The company is valued at 28 times Mitchell's 2012 non-GAAP estimates. Pitted against his estimate that Amazon could grow earnings about 30 per cent a year for several years, it is still cheap.
"Most investors have been willing to look through weaker-than-expected margins in 2H10 assuming leverage would resume in 2011," analyst Marianne Wolk at Susquehanna Financial said.
Reuters