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Amazon downgraded
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October 24, 2001: 11:51 a.m. ET
Merrill downgrades Amazon, stock plunges after company lowers 4Q sales forecast.
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NEW YORK (CNNmoney) - Merrill Lynch downgraded Internet retailer Amazon.com Inc. Wednesday, a day after the company posted third-quarter results in line with Wall Street expectations, saying revenue continues to decline at the company despite strong cost-cutting moves that have helped boost the bottom line.
The company's announcement that it anticipates fourth-quarter sales growth up to 12 percent below Wall Street expectations prompted the downgrade and a selloff of the stock despite Amazon's reaffirmation to turn its first ever profit in the fourth quarter mainly through significant cost-cutting measures.
Amazon's (AMZN: down $1.85 to $7.70, Research, Estimates) stock plunged 17 percent in morning trading Wednesday. Its shares traded above $9 Tuesday before the earnings announcement.
"We still believe Amazon will eventually build a successful business. With little visibility into 2002, however, and the prospect for additional declines in the core business, the stock appears expensive," influential Merrill Lynch analyst Henry Blodget said in a research note Wednesday.
Blodget reduced his intermediate-term rating on the company to "neutral," but maintained his long-term "buy" rating.
"The company continues to make progress toward profitability, but revenue growth continues to decelerate," Blodget said.
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Additionally, on Wednesday Prudential Securities analyst Mark Rowen reiterated his "hold" rating on Amazon stock, also noting the lackluster revenue growth.
"We believe that third-quarter results reflect Amazon's ongoing struggle to find a balance between profitability and growth," Rowen said in a research note. "Until management is able to demonstrate that it can successfully achieve both goals at the same time, we believe Amazon shares have little upside potential." 
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