Amazon down 4 percent after Lehman analyst questions valuation

Posted 1:56PM on Wednesday 27th March 2002 ( 23 years ago )

NEW YORK - Amazon.com Inc. shares fell as much as 8 percent Wednesday after a Wall Street analyst questioned the company's valuation and parts of its business. The stock recovered some of its early losses and traded Wednesday afternoon at $14.21, down 62 cents on the Nasdaq Stock Market. In 2001, the Internet retailer lost $556.75 million on revenue of $3.12 billion. In her research note, Lehman Brothers Inc.'s Holly Becker wrote that Amazon, which reported its first profitable quarter for the quarter that ended Dec. 31, has made "impressive progress." Yet Becker, who has a market perform rating on shares of Amazon, also wrote that "certain aspects" of the Seattle electronic-retailer continue to concern her. Becker wrote that there is "little visibility" into Amazon's Services business, in which Amazon provides electronic-commerce services for other retailers. She also questioned the sustainability of that business. The analyst also wrote that Amazon's revenue growth is being driven by its International and Services business, which she referred to as "more risky and less valuable." Lastly, Becker voiced concern about Amazon's valuation, which she described as "rich on every level." In the research note, Lehman Brothers' Becker praised Amazon in several areas. She noted, for example, that after a full year of slowing sales growth, Amazon was able to reinvigorate its book, music and video business. Revenue in the unit grew by 5 percent in the fourth quarter, beating analysts' expectations. Becker credited that turnaround to Amazon's decision last August to slash prices on all books over $20. Becker wrote that Amazon's fourth-quarter performance has put the company well "out of the woods" with regard to its cash position and bankruptcy risk. The analyst noted that the company finished the quarter with almost $1 billion in cash and marketable securities and she predicts Amazon will generate positive cash flow from operations for all of 2002. Citing company policy, Amazon spokesman Bill Curry declined to comment on the decline in the stock price Wednesday and on Holly Becker's research note.

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