'Every rockstar needs a break': Here's what Wall Street is saying about Amazon's disappointing guidance

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Jefferies — 'Every rockstar needs a break'

Jefferies — 'Every rockstar needs a break'

Price target: $2300 (from $2260)

Rating: Buy

"Every rockstar needs a break," said Jefferies analyst Brent Thill.

"As Amazon continues to grow in scale, leverage in the model is beginning to show up in results. Investment in infrastructure (both fulfillment and AWS) and headcount decelerated further in third quarter despite strong usage growth as both AWS and retail achieved better infrastructure efficiencies. Continuing mix shift to third-party sales and solid ad revenue growth (at much higher margins) are helping profitability too. Still, on quarter to quarter basis, profitability will remain lumpy as Amazon continues to invest in many areas (including international, AWS, ad business)."

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RBC Capital Markets — 'Amazon remains an Internet staple'

RBC Capital Markets — 'Amazon remains an Internet staple'

Price target: $2300 (from $2100)

Rating: Outperform

"Amazon remains an Internet staple," said Mark Mahaney at RBC.

"Amazon posted generally positive third-quarter results—In-line Revenue with the highest Gross Margin we have seen in any third quarter & record high Operating Margin. $1.3B Operating Profit upside was Amazon’s biggest ever. That said, guidance came in below expectations although, for Operating Margin in particular, given the historical seasonality, we believe there could be upside."

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Nomura Instinet — 'Every business in Amazon’s stable is growing faster than first-party sales'

Nomura Instinet — 'Every business in Amazon’s stable is growing faster than first-party sales'

Price target: $1990

Rating: Buy

"Amid a tenuous market, Amazon’s missed sales and EBIT (despite lowered expectations) and a below-Street guide, proved enough to weigh on shares after market," said Simeon Siegel at Nomura Instinet.

"Looking forward, we continue to point to mathematical earnings growth via margin mix shift as every business in Amazon’s stable is growing faster than first-party sales. And even with what appears to be a slowing in underlying Prime Member growth, we expect margin lifts to provide meaningful EPS upside, as seen last night. Reiterate Buy following the sell-off."

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Macquarie Research — 'Amazon's stock momentum will likely come to a halt'

Macquarie Research — 'Amazon's stock momentum will likely come to a halt'

Price target: $2100

Rating: Outperform

"Amazon's stock momentum will likely come to a halt until we get a better sense of how the holiday will play out," said Benjamin Schachter at Macquarie Research.

"The bottom line is that third-quarter EBIT was strong as the company is leveraging its assets and growing its highest margin businesses faster than expected. However, given the run in the stock over the past 12 months, the weaker than expected guidance, slowing unit growth, and overall decelerating rev lines may impact the stock. Nothing in the print changes our fundamental view on Amazon."



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Suntrust Robinson Humphrey —'We would be buyers'

Suntrust Robinson Humphrey —'We would be buyers'

Price target: $2250 (from $2150)

Rating: Buy

"Market jitters have the stock down on 4Q18 guidance, but we would be buyers," said analyst Youssef Squali at Suntrust Robinson Humphrey.

"We believe the 4Q18 revenue guide (which is shy of consensus) is on the conservative side, as the company is greatly positioned to benefit from a robust holiday season and 4Q tailwinds in India."

"We reiterate our Buy rating/raise our PT to $2,250 to reflect 1) solid top line and impressive out-performance in operational efficiency/profitability, and 2) the shifting of our price target to year-end 2019 from 2018," Squali added.

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