How Will Amazon.com (AMZN) Stock React To FTC Lawsuit?

NEW YORK (TheStreet) --Amazon.com Inc. (AMZN) was sued by the Federal Trade Commission over allegations the online retailer didn't get consumer consent regarding the purchases of mobile-apps by children, Bloomberg reports.

Amazon said in a letter sent to the agency that the FTC was looking to name terms similar to those it laid out in a suit against Apple Inc. (APPL), in which Apple had to refund at least $32.5 million to customers regarding mobile charges made by children.

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But Amazon said its purchasing procedures already meet the requirements set by the Apple lawsuit and that it has returned money to customers for unwanted purchases. Amazon is planning on fighting the lawsuit, which was filed in a Seattle Federal Court, Bloomberg noted

Shares of Amazon are lower by -0.18% to $329.39 in early afternoon trading on Thursday.

Separately, TheStreet Ratings team rates AMAZON.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMAZON.COM INC (AMZN) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 4.3%. Since the same quarter one year prior, revenues rose by 22.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • AMAZON.COM INC has improved earnings per share by 27.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMAZON.COM INC turned its bottom line around by earning $0.58 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus $0.58).
  • Despite currently having a low debt-to-equity ratio of 0.30, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • The gross profit margin for AMAZON.COM INC is currently lower than what is desirable, coming in at 33.92%. Regardless of AMZN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.54% trails the industry average.
  • Net operating cash flow has declined marginally to -$2,502.00 million or 5.48% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: AMZN Ratings Report
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