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. Last Updated: 07/27/2016

Amazon Shares Drop On Run of Bad News




SEATTLE -- Internet retailer Amazon.com Inc. saw its share price drop nearly 10 percent on Wednesday after its president abruptly quit, its stock got downgraded and its web site crashed.


All that came just hours before Amazon, a bellwether for the entire online retailing sector, posted a quarterly loss that beat the Wall Street consensus, but failed to prevent a steep sell-off of the stock in after-hours trading.


Amazon, seen as a bellwether for the entire online retailing sector, has come under increasing pressure as many investors and analysts grow skeptical that the company can deliver profits any time soon.


Amazon said that for its second quarter, which ended June 30, it recorded a pro forma net loss of $115.7 million, or 33 cents a share, excluding special items, compared to a loss of $82.7 million, or 26 cents a share in the year-ago period.


The company was expected to lose 35 cents a share, according to the consensus analysts' estimate compiled by First Call/Thomson Financial.


Amazon stock dropped as low as 31-15/16 in after-hours trading from its regular session close of 36-1/16 before rebounding to 33-7/8.


Chief financial officer Warren Jenson said in a statement that Amazon ended the quarter with $908 million in cash and cash equivalents and expected to finish the year with $1 billion in cash.


The spate of bad news started on Tuesday afternoon when Amazon President Joseph Galli, who was with the company just 13 months, suddenly resigned to become the chief executive of VerticalNet Inc.


Then, two brokerages, Banc of America Securities and Lehman Bros., downgraded Amazon shares.


Banc of America analyst Tom Courtney on Tuesday cut Amazon to a "buy" from a "strong buy," and withdrew his price target of $80 a share, saying he would revise that after the earnings announcement.


On Wednesday, Lehman analyst Holly Becker, painted an even grimmer picture of the company and said she was "throwing in the towel on Amazon," expressing frustration with its attempts to expand beyond its core bookselling business into areas like hardware, kitchen supplies and toys.


Becker cut her rating on Amazon to "neutral" from "buy."


Last month, another Lehman analyst, Ravi Suria, cast fresh doubts on Amazon's business when he described its credit as "extremely weak and deteriorating" and forecast the company would run out of cash within a year.


The comments, which Amazon dismissed as "hogwash," sparked in June a steep sell-off of the company's shares, which hit a 52-week low of 32-7/16, far below its peak of 113.


Amazon was also stung Wednesday when its online store crashed for a short time. A spokeswoman said the site was down for about 40 minutes, adding that it was not caused by a hacker attack.