Updated from 10:05 a.m. to include new information about Amazon and Twitter in the ninth paragraph.
NEW YORK (TheStreet) –– As investors continue to worry about Amazon's (AAPL) long-term spending plans, the company may be able to do two things to reassure shareholders, according to some on Wall Street.
Barclays analyst Paul Vogel, who rates Amazon "equal weight" with a $330 price target, believes that Amazon needs to reinvigorate revenue growth, which has slowed to 20% year-over-year growth from 40% growth year over year just three years ago. Or, the company can improve operating margins, which have been hovering around 2% for some time, to prove that the company's relentless spending to move into new areas has been worth it.
In the second quarter, Amazon's revenue was $19.34 billion, up 23% year over year. However, the company lost 27 cents a share, compared to an estimate of 15 cents, as research and development costs and operating expenses roses.
"Our key takeaway, we see modest margin improvement likely over the next few years (somewhere around 50 bps per year) and believe margins will be held back equally in the short to intermediate term by both structural . . . and discretionary (AWS) expenses," Vogel wrote in the note.
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For the third quarter, Amazon expects revenue to be between $19.7 billion and $21.5 billion, and expects an operating loss between $810 million and $410 million. Analysts surveyed by Thomson Reuters expect the company to lose 73 cents a share on $20.87 billion.