Carly Forster

About the Author Carly Forster

Content Manager at TipRanks. Earned a Bachelor of Arts Degree with a Major in Communications at the University of California, San Diego.

RBC Capital’s Mark Mahaney Comments On Amazon In Light Of Disappointing Earnings Results


Amazon.com (NASDAQ:AMZN) is a Seattle, Washington based American international electronic commerce website, as well as the largest internet company in the world.

Amazon in the News

The e-commerce company released its third quarter financial report on Thursday October 23rd, missing analysts’ expectations all across the board. As a result, Amazon shares dropped 8.3% on Friday to a new 52-week low of $287.06, uprooting over $12 billion in value. In addition, Amazon’s stock has dropped almost a third since January of this year. Investors are starting to question the company’s “investment mode” ever since it missed its second-quarter forecast.

In Its Q3 results, Amazon reported -$0.95 earnings per share on a diluted basis, falling short of analysts’ expectations of -$0.74 by $0.21. During the same quarter of last year, Amazon posted -$0.99 earnings per share. The company earned revenue of $20.58 billion for the quarter, meeting the analysts’ consensus estimate. Amazon’s quarterly revenue was up 20.4% on a year-over-year basis. Analysts expect that Amazon.com will post $-0.12 EPS for the current fiscal year.

Amazon CEO Jeff Bezos has been trying to remain optimistic with a positive outlook towards the upcoming holiday season. He stated in the report, “As we get ready for this upcoming holiday season, we are focused on making the customer experience easier and more stress-free than ever…In addition to our already low prices, we will offer more than 15,000 Lightening Deals with early access to select deals for Prime members, hundreds of millions of products across dozens of categories, curated gift lists like Holiday Toy Lists and Electronics Holiday Gift Guide, new features like #AmazonWishList, and a great new lineup of products like Kindle Voyage and Fire HD Kids Edition. And if you order your gifts on AmazonSmile, we’ll donate a percentage of your purchase price to your favorite charity.”

A Financial Expert’s Opinion

On October 24th, RBC Capital analyst Mark Mahaney maintained an Outperform rating on Amazon but lowered his price target from $435 to $420. Despite being bullish on the stock, Mahaney called Amazon’s Q3 report “a loud back-fire.” He reasoned, “Amazon remains a very aggressive investor…We highly doubt that all these investment won’t pay off in the form of eventual revenue growth reacceleration AND eventual margin expansion.”

Mahaney claims he is standing by Amazon for a number of reasons despite the fact that its investment cycle “is clearly lasting much longer than anticipated.” Some of these reasons include: the company demonstrated that it could maintain profitability prior to its investment phase starting again in 2010; the company has continuous growth in revenue; and Amazon Prime gives the company margin power.

Mahaney has rated Amazon 25 times since 2009 earning a 63% success rate recommending the stock and a +17.7% average return per recommendation.

Mark Mahaney’s Past Recommendations

Mahaney has experience in recommending online companies, such as Google (NASDAQ: GOOGL) and Facebook (NASDAQ: FB) helping him earn an overall success rate of 63% recommending stocks and a +26.3% average return per recommendation.

Mahaney last recommended Google on October 17th, maintaining an Outperform rating on the stock. Since then, Google has gone up from $522.97 to $553.10. Mahaney has rated Google 31 times, helping him earn a 77% success rate recommending the stock.

Similarly, Mahaney last made a recommendation for Facebook on August 29th and reiterated an Outperform rating. Between then and now, the stock has risen from $74.82 to $80.38. Mahaney has made a recommendation for Facebook 16 times, attributing to his 100% success rate recommending the stock.

However, Mahaney has not always made helpful recommendations. For example, he last maintained an Outperform rating on eBay (NASDAQ: EBAY) on September 30th of this year. Since then, the stock has dropped from $56.63 to $51.34. Mahaney has rated eBay 11 times, helping him earn a 29% success rate recommending the stock.

Conclusion

The holiday season is fast approaching, giving room for Amazon to gain some momentum after its abysmal Q3 report. Mahaney sees Amazon as an aggressive investor and believes there will be a decent payoff in the future. Do you trust Mahaney’s latest recommendation for Amazon based on his financial advice history?

 

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