AMZN,
Forbes Magazine
Makers & Breakers: Cry Me a River
Thursday October 10, 6:36 pm ET
By Christopher Helman
After seven years in business Amazon.com (NasdaqNM:AMZN - News) is still far from having a profitable year. It has posted net losses of $281 million over the last four quarters and has a $3 billion accumulated deficit. Yet investors still stuck in a bubble-era mindset have bid shares up 158% in the last 12 months.
Why all the excitement? Investors are enthused by partnerships with the likes of Target, Office Depot, Toys "R" Us and Expedia.com. In order to draw more big names onto its site, Amazon has been pushing deep discounts on items like bestselling books and offering free shipping on all orders of $25 and up. Previously you had to order $99 worth to get free shipping.
Problem is, says Billy C. Bowden, analyst at Crown Capital Partners, while Amazon's tactics may boost sales and customers, they'll likely squeeze margins even more. For each (low-margin) pencil sold in Office Depot's corner of Amazon, the online service gets just a small fee. And showing the complications of bringing on partners, Amazon is already in a beef with Expedia.com over $3.7 million the company says Expedia owes it. End result: Amazon's investors are going to wait longer than they expected for black ink. Short the stock. Cover at $10.
