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. Last Updated: 07/27/2016

Amazon Falls 19% on Unfavorable Reports




Shares of e-retailer Amazon.com dropped 19 percent in heavy trading Friday on investors' concerns over the company's financial health and its prospects for profitability.


Friday's decline in Amazon shares appeared to be a reaction to comments issued by two research analysts at influential Wall Street firms.


Ravi Suria, a credit analyst at Lehman Brothers, wrote a report on Amazon's $2 billion in bonds issued in the last few years, questioning the firm's financial strength and ability to generate cash to repay bondholders. Suriasays the firm's success hinges upon its ability "to generate the cash operating profile of a successful retailer. It is essentially this yardstick that we use to analyze the company, and as the rest of this report shows, we find it woefully lacking."


Amazon's bonds fell 10 percent on the day. Shares of Amazon fell $8.125 to $33.875. The stock is down 55 percent so far this year. The company has never posted a profit.


"What we think truly pushed a weak credit off the cliff was the inept working capital management during the last holiday season," Suria said.


Suria said Amazon's lack of profits has made it rely on investors for funding. But as Internet companies have begun to fail, "the market has become a lot more selective," he said.


Bill Curry, Amazon's spokesman, called Suria's report "hogwash." But he declined to identify specific facts in the report the company disputed. According to a source close to the company, Suria's report was also made available to Amazon on Friday.


Mixed messages came Friday on Amazon from Mary Meeker, the influential Internet analyst at Morgan Stanley Dean Witter, which has managed Amazon's two recent bond offerings. As recently as June 2, Meeker was positive on Amazon. But a message to Morgan Stanley's salespeople Friday morning summarizing her views on Amazon began this way: "Mary believes there will be no upside to her June and September revenue estimates and there could be some modest downside.''


In Meeker's later communique, there was no mention of a "modest downside" to the firm's prospects. A Morgan Stanley spokesman could not explain the discrepancy between the two messages. Meeker was traveling and could not be reached.