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Amazon to report 3Q
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October 23, 2001: 3:12 p.m. ET
Blodget sees better-than-expected 3Q for Internet bellwether.
By Staff Writer John Chartier
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NEW YORK (CNNmoney) - Amazon.com is expected to post a sharply narrower third-quarter loss Wednesday, but one influential Wall Street analyst believes the world's biggest Internet retailer could beat expectations despite a slowdown in consumer spending.
Investors will be closely watching the bellwether company's earnings report, especially for future guidance, which is likely to affect the tech-heavy Nasdaq.
Merrill Lynch analyst Henry Blodget said in a research note Tuesday that Seattle-based Amazon (AMZN: up $0.41 to $9.18, Research, Estimates), which is scheduled to report third-quarter earnings after the closing bell, could post a loss of 15 cents a share, a penny better than the Wall Street consensus of 16 cents, according to earnings tracker First Call.
Analysts also are forecasting third-quarter revenue of $650.3 million.
Blodget also said his revenue estimate of $638 million for the quarter is conservative despite slower consumer spending in the wake of the Sept. 11 terrorist attacks on the World Trade Center and the Pentagon.
Amazon, which has never turned a profit, made a bold promise to investors earlier this year that it would post a small operating profit by the fourth quarter.
But tempest-tossed investors will listen carefully to Amazon for any news of how the terrorist attacks might have affected its outlook for the fourth-quarter and beyond.
Analysts remain skeptical, with fourth-quarter forecasts for a loss of 7 cents a share, according to First Call. An economic downturn marked by slower consumer spending has hurt virtually all retailers. Only a few, such as discount chains like Wal-Mart, have not been seriously affected.
Blodget said he expects Amazon to lower its revenue outlook modestly for the fourth quarter, which calls for 10-20 percent growth from a year ago, but to reaffirm expectations for an operating profit.
Though the terrorist attacks unquestionably hurt sales, Blodget said they came three-quarters of the way through Amazon's third quarter, which means they are likely to have a limited effect on sales. He estimates the company lost $20 million to $25 million of third-quarter revenue because of the tragedy, not enough to miss its own $625 million to $675 million revenue forecasts.
The stock is likely to rise if that happens, since most analysts anticipate Amazon will withdraw its fourth-quarter profit guidance.
"We also believe that some analysts are projecting that the company will miss the low end of the guidance range in Q3 and withdraw its goal of operating profitability in Q4," Blodget said. "As a result, if the company hits the mid-point of the guidance range and reaffirms Q4 operating profitability, we would expect the stock to go up."
Struggling to survive
Amazon's stock has plunged nearly 80 percent from its 52-week high of $40.87 set last November. In afternoon trading Tuesday, its shares traded up 33 cents at $9.10.
The company has tumbled from its dot.com mantel along with hundreds of other companies as the tech bubble burst nearly two years ago and dot.com companies realized it was next to impossible to turn a profit on razor-thin margins. The costs of acquiring customers remained high, yet at the same time Internet retailers were forced to offer competitive prices or free shipping in order to attract and keep those customers.
Amazon has been a survivor, fostering key partnerships with well-established brick-and-mortar companies such as Toys "R" Us, Borders Group and Target Corp.
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The company has also grown its second-hand items business and launched new customized services.
However, some analysts have questioned the company's strategy of launching an online computer store at a time when PC sales are slumping. Amazon was counting on a rebound in the industry as consumers prepare to replace their existing boxes. But in the wake of the terrorist attacks, many believe consumers will put off such big-ticket purchases until the economy stabilizes and layoffs begin to ebb.
Despite the unknown factors related to the economy and the terrorist attacks, Blodget said he remains comfortable with Amazon's cash position and estimates it will end the quarter with $505 million cash. 
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