Updated from 8:19 a.m. EST
was downgraded to sell -- a rating as rare on Wall Street as an empty cab on a rainy day -- from hold by Mark Rowen at
Rowen also slashed the company's price target to $9 from $20. (Prudential has not done underwriting for Amazon.)
"A combination of a slowing economy, the law of large numbers, the dot-com meltdown and surrounding publicity, and in our opinion, household saturation
has finally caught up with the company and its record of hyper-growth," Rowen said. "The anemic growth in Amazon's most mature, and only profitable, segment has caused us to reexamine Amazon's market valuation."
Also, the analyst said that Amazon's market cap is overextended, and poses further downside risk to investors. Recently, the stock was down 2.2% to $14.06, generating a market cap of about $5.2 billion.
Prudential also noted that if Amazon's U.S. book, music and video businesses are combined with its international segments, the retailer would have more than $2 billion in revenue for 2000.
"We find this extremely impressive, considering the company sold its first book a little more than five years ago. Yet given the fact that the largest book retailer in the world,
Barnes & Noble
, is expected to generate revenue of approximately $4 billion in the fiscal year ending Jan. 31, 2001, we are not really surprised that Amazon's fourth-quarter U.S. book/music/video growth was a disappointing 11% above the fourth quarter of 1999," Rowen wrote
Furthermore, Rowen noted that even though Amazon was able to effectively raise prices in its U.S. book/music/video segment, the firm believes the move came at the cost of revenue growth.
While the dreaded sell rating is rare, Amazon becomes Prudential's 11th stock out of 650 under coverage with the rating. It joins