Monday, February 28, 2011

Amazon.com (AMZN) Downgraded on Margin Pressures

Amazon.com (Nasdaq:AMZN) was downgraded by UBS (NYSE:UBS) today, as the company sees them under margin pressure in the future.

UBS analyst Brian Pitz said, "While we maintain our long-term thesis that AMZN will continue to dominate eCommerce, taking share from offline / online competitors, we are concerned that a more prolonged investment period – namely due to increased content costs and new distribution deals with hardware providers (game consoles, TV’s, etc) – may pressure margins for longer than originally anticipated."

Pitz noted that estimates for the second half are probably too high, as they don't include Amazon's entry into free subscription streaming for its premium customers.

He sees "significant competition for content deals that will only continue to heat up."

UBS lowered its first quarter EPS estimates from $0.67 to $0.61, full year 2011 from $3.48 to $3.07, and full year 2012 from $5.33 to $4.40.

UBS downgraded Amazon to "Neutral," which was trading at $173.14, down $4.10, or 2.31 percent, as of 12:41 PM EST.

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