NEW YORK (TheStreet) -- Shares of Amazon.com (AMZN) are down 2.75% to $329.32 after Moody's investors service lowered its outlook for Amazon's credit rating to "negative" from "stable" after the online retailer said it would issue a "substantial" level of new senior unsecured notes, the Wall Street Journal reports.
Moody's, however, affirmed Amazon's medium investment-grade Baa1 rating, as the company's "excellent liquidity provides sufficient cushion," the credit ratings firm told the Journal.
Moody's said it took into consideration Amazon's dominant position in the online retail space, but said that the company faces growing competition from traditional retailers who work to broaden their online businesses, the Journal added.
Separately, TheStreet Ratings team rates AMAZON.COM INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMAZON.COM INC (AMZN) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself, poor profit margins and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 965.9% when compared to the same quarter one year ago, falling from -$41.00 million to -$437.00 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, AMAZON.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of AMAZON.COM INC has not done very well: it is down 12.54% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for AMAZON.COM INC is currently lower than what is desirable, coming in at 34.98%. 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 -2.12% trails the industry average.
- AMAZON.COM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMAZON.COM INC turned its bottom line around by earning $0.58 versus -$0.10 in the prior year. For the next year, the market is expecting a contraction of 221.6% in earnings (-$0.71 versus $0.58).
- You can view the full analysis from the report here: AMZN Ratings Report