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Amazon Earnings Preview

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    Mark Mahaney of Citi Investment Research gives his outlook for Amazon earnings.

  • Duration 3:54
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-- Bonnie thanks so much.

And our next guest he's Amazon's first quarter numbers coming in below the street's expectations but -- still -- shares are by mark Haney covers Amazon as Citi Investment Research is.

Managing director -- great to have you on the show so why -- your.

Forecast do you think weaker than the street consensus.

What's so hard thing to answer but look there are a lot of pressures on that Amazon right now one actually comes surprisingly from apple.

The extent that apple had a monster quarter -- -- did two quarters in a row at some level that take some of the air out of the consumer electronics retailing space whether that's an offline or -- online retailer Best Buy or Amazon.com that's pressure number one near term pressure number two.

You already mentioned it is this a shift over to third party sales where they generate less revenue although more profits for a transaction so that -- shift.

Gives you kind of up pressure -- downwards pressure on that the revenue growth that that that's also been a near term issue.

I let's talk about the people might just holding back purchases waiting for this new fire person to come out what are your thoughts on that is that is that what's going on that with the products.

Well let's say this is still pretty new product conference on remember they only launches in the fourth quarter there's a very well unknown company about the product and market they'd -- iPad which is running away and -- that that segment.

Dubbed the fires come out and the fire -- small market share initially but there is some major problems of that first -- they need to improve that the Kindle fire if they can do that if they can get a improved lighter better user interface device on the middle this year at that same price point to lower that's at Amazon's ability did opportunity -- material share in that in that segment.

A -- and a little bit -- -- your price target still above where it's trading out 250 dollars a share so what's your timeline -- what's gonna take to drive.

Amazon shares to that level.

I think that timeline is by the end of this year and I think it comes back to that margin issue.

You pointed out earlier that Amazon's margins have gone from 6% down to 2% death we think that's because his companies in elective investment cycle.

They're investing in new fulfillment centers new products like that Kindle fire release.

If they if that's true and they get back to a 6% margins the next your upside so what we're really the most important thing to come out of this earnings is.

Whether those margins to companies operating margins are starting to stabilizing grow again if they are the stock works if they don't the stock keeps under pressure.

This spending a fortune right now -- its growth when you think at a strategy.

I think if the absolute right strategy this company.

He's building up more distribution centers because more of us want to purchase more products from m.s on a broader range of products and now including a lot of office products to.

So the more distribution center today -- capacity they build -- the -- they can handle demand.

They're also putting a lot of our marketing dollars in R&D dollars behind devices that Kindle.

I don't know about the fire we don't know about the -- -- depends how good this next version is are also investing in these cloud computing service is called Amazon web services.

That had materially gain share it's over billion in revenue for the company's probably -- close to close 200% year over year so the investment areas we think you're right they're accurate this company is a pretty good investment history you know going back fifteen years we think they'll be able to come out of the cycle again.

With regard to the competitors mentioned apple in the blowout quarter for apple may spell trouble for Amazon we'll see for -- develop course Netflix also reported earlier this week.

Asking now -- the streaming side of the business Netflix is a big disappointment to a lot of folks can Amazon.com get a leg up there.

Probably not they I think they're gonna hedge themselves I don't I don't think they're gonna make the full.

Effort into the space I think that's that's very hard to take on Netflix at this time Olympics Netflix is other issues too but.

I don't think that Samsung wants to build out a full.

Video streaming subscription service are a lot Netflix they may -- -- -- and in an international markets where Netflix doesn't have the establish presence.

Our -- is that debt Amazon's investments are gonna be curtailed or limited in the video streaming space.

Can't wait to hear the report from Amazon.com -- many thanks for --

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