July 25 Amazon.com Inc's heavy
investment in new content and technology to fight off
deep-pocketed rivals is proving expensive and analysts fear this
will hurt operating earnings for some time.
Shares of the company traded down 12 percent at $315 in
premarket trading, as at least 11 brokerages cut their price
targets on the stock by as much as $60 to $340-$460.
At least two brokerages downgraded their rating to an
equivalent of "hold".
"We are in the early stages of a massive ecosystem war
between Apple, Google, Amazon, Microsoft
, and possibly others such as Facebook and
potentially Alibaba," Macquarie Research analyst
Ben Schachter said.
"Within that context, it is clear that this ecosystem war is
going to be expensive and will impact margins."
Amazon on Thursday forecast an operating loss of between
$410 million and $810 million for the third quarter ending
September, a sharp increase from a loss of $25 million a year
Jefferies analysts said Amazon usually gives a fairly
conservative outlook and has exceeded its forecast in nine of
the past ten quarters.
Amazon is spending billions of dollars expanding its network
of warehouses and buying digital content.
The e-commerce giant's new products and businesses unveiled
this year include a subscription book service, new digital
content for its Prime online video service, a TV streaming-box
and the upcoming "Fire" smartphone.
The company's sharp price cuts for its cloud computing
service this year also hurt revenue growth.
"In our view, the company clearly has solid growth prospects
for the foreseeable future as it invests in new businesses," BMO
Capital Markets analyst Edward Williams said.
"However, heavy spending is hampering profitability in the
near term, placing pressure on the margin structure."
(Reporting by Supantha Mukherjee in Bangalore; Editing by Savio