Amazon Taken Down a Notch on Downgrade

Michael Teague |

Jeff Bezos, CEO of Amazon.comOn Thursday, J.P. Morgan Chase's (JPM) analyst downgraded stock of the online retail giant Amazon (AMZN) from “overweight” to “neutral” and reduced its price target from $333 to $300, based on worried about gross profit growth.

The stock has gained nearly 10 percent on the year-to-date, nearly 50 percent over the last year, and has more or less been ahead of the market’s bull run of the last four.  Thursday’s news, however, sent share prices down 3.42 percent to $265.70 by the closing bell.

The otherwise dominant company is set to transition from first to third party sales this year, and analysts believe that third-party sales will be slower for the remainder of 2013. Gross profit is projected at 31 percent compared to last year’s 40 percent.

Wednesday, the company announced a 10-percent price reduction for the Wi-Fi only Kindle Fire and a 20-percent reduction for the Kindle Fire 4G, though margins are expected to contract based on the cost of creating the devices coupled with their increasing popularity. This estimation was made despite claims by the company’s vice president Dave Limp that Amazon has managed to decrease production costs and wants to pass the savings on to customers.

J.P. Morgan analysts also factored in the possibility of competition coming from other e-commerce companies like eBay (EBAY) who have been working hard at staying competitive, as well as the seemingly ever-widening array of companies against which Amazon is expected to be competing in the future, not least of which are Apple (AAPL), and Google (GOOG).

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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 112.18 -1.77 -1.55 35,886,990
AMZN Amazon.com Inc. 829.05 0.33 0.04 4,922,248
EBAY eBay Inc. 32.30 0.45 1.41 16,921,252
GOOG Alphabet Inc. 775.01 -6.55 -0.84 1,314,746
HCA HCA Holdings Inc. 75.26 -0.17 -0.23 2,452,232
JPM JP Morgan Chase 65.65 -1.06 -1.59 18,727,192

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