McAdams Wright analyst Dan Geiman this morning cut his rating on Amazon.com (AMZN) to Hold from Buy on a valuation basis. He raised his price target on the stock to $160, from $140, but even that level is just barely above yesterday’s close at $157.06.
Geiman notes that the stock is up more than 45% over the last two months, and now trades at 61x his 2010 EPS estimate of $2.56, and 44x his 2011 estimate of $3.54.
Geiman is still bullish on fundamentals. “We�re still quite favorable on the company�s prospects in the coming quarters, despite near-term headwinds related to marketing-related expenses supporting Kindle and ongoing investments to increase the company�s fulfillment capacity, as well as more difficult sales and margin comparisons,” he writes, adding that revenue growth will remain robust, up an estimated 35% this year and 25% next year.
But he adds that the risk/reward has become less attractive, especially given tougher earnings comparisons ahead.
Meanwhile, Raymond James analyst Shyam Patil launched coverage of the company this morning with a Market Perform rating and has a similar view: impressive company, pricey stock.
“From a company perspective, Amazon has strong fundamentals and solid near- and long-term prospects,” he writes in a research note. “The company continues to outpace e-commerce market growth by 2-3x while generating healthy [free cash flow]. Amazon has executed its Kindle strategy and positioned itself to benefit from cloud computing with a leading platform. At the same time, management continues to invest in infrastructure, marketing, and technology to drive sustainable long-term growth, further share gains, and improve its competitive positioning.”
But, Patil adds, “this enthusiasm is already captured in the valuation.”
AMZN today is down $4.14, or 2.6%, to $152.92.
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