Goldman Puts More Kindling On The Fire, Cuts Amazon Price Target To $182

Tyler Durden's picture

Goldman not happy with with the fact that contrary to market expectations, the Amazon negative margin retail caterpillar keeps on refusing to transform into a beautiful apple. To wit: "Amazon reported 4Q11 results after the close. Despite upside to EPS versus consensus and consolidated segment operating income which came in materially above the Street, in our view the focus will be on the shortfall in revenue, which came in at $17.4bn versus consensus of $18.3bn. In fact, the 4Q2011 quarter marks the second consecutive quarter that Amazon has fallen short of the consensus revenue forecast. Along with a slowdown in growth in video games and consoles and an impact on certain sales due to the floods in Thailand, management also referenced the macro environment as a cause for the miss, with weakness in Europe called out in particular. As for its Kindle and Kindle Fire performance in 4Q2011, we estimate sales hit 10.6mn, below our forecast of 13.9mn units. That said, we believe the company hit our more important Kindle Fire unit forecast of 6mn, suggesting the Fire cannibalized sales of traditional e-readers. As for guidance, Amazon gave an outlook below consensus on all major metrics; revenue, GAAP  operating income, and CSOI. As such, we are lowering our revenue forecast for the year by roughly $2bn to $63.6bn versus the Street prior to last night at  $65.3bn, and our GAAP operating margin is being reduced to 0.3% for CY2012, versus consensus of 1.8%. On lower expected sales and higher expenses we are reducing our 2012/2013 GAAP EPS by 75%/40% to $0.36/$2.11 from $1.42/$3.57 versus consensus of $1.88/$3.75 prior to the call. On lower expected earnings we are reducing our 12-month price target to $182 from $190. At around $177 in the after market, Amazon is trading at 29X our 2012 non-GAAP EBITDA estimate of $2.57bn. Our price target is based on our equally weighted DCF, P/E, and EV/EBITDA analysis." Time for Amazon to make up for ever lower margins with even higher volume. Or something.