's Stock Plunges

Friday, June 23rd 2000, 12:00 am
By: News On 6

NEW YORK (AP) — Inc.'s shares plunged nearly 20 percent Friday after a report from Lehman Brothers warned that the money-losing online retailer's business was at risk.

Adding to its slide in the stock price were negative comments from influential Internet stock analyst Mary Meeker.

Amazon fell $8.125 to $33.875 on the Nasdaq Stock Market. The stock is down more than 70 percent from its 52-week high of $113 in December.

Amazon, which went online nearly five years ago, has built itself into a Web superstore, selling everything from drills to kitchen mixers to books. More than 20 million people have shopped on its site, and analysts expect Amazon to add about 2.7 million more in the quarter that ends next week.

But the Seattle-based company has yet to turn a profit and continues to pile on steep losses.

Lehman fixed-income analyst Ravi Suria said in his report that Amazon may be one of the best-established brands on the Internet, but ``we find the credit extremely weak and deteriorating.''

Suria specifically criticized Amazon for not being able to make hard cash per unit sold. From 1997 through the first quarter of 2000, the company has received $2.8 billion in financing, primarily through debt offerings, while its revenues has totaled $2.9 billion, meaning that it has cost the company 95 cents for every $1 in revenue.

He said that Amazon has $1 billion left from the $2.2 billion it raised in the previous five quarters. For Amazon to continue operations and grow, it much either generate sufficient cash flow or keep raising money, he said.

``Going into what is arguably its most challenging holiday season, we believe that that the combination of negative cash flow, poor working capital management and high debt load in a hyper-competitive environment will put the company under extremely high risk,'' he said in the report.

Amazon spokesman Bill Curry called the Lehman report ``pure hogwash'' and said the company is ``nowhere near running out of cash.''

``We ended the first quarter with more than $1 billion in cash and we expect to generate positive cash flow from operations over the rest of the year,'' Curry said.

The Lehman report wasn't the only thing that hurt Amazon's stock on Friday. Morgan Stanley Dean Witter's Meeker, in a message to brokers at the firm, said that she did not expect any upside to her second- and third-quarter revenue estimates for Amazon, and sales could fall modestly lower than expectations, according to a Morgan Stanley spokesman.

Meeker, however, added that Amazon is very much a fourth-quarter company and she expects strong growth toward the end of the year, the spokesman said.

Wall Street analysts are generally estimating that Amazon's second-quarter revenues will be around $600 million, more than a 90 percent gain over the same quarter a year ago and a 5 percent gain from the first quarter. The company is expected to release its quarterly results late next month.

While Amazon's stock was hit hard Friday, not everyone was down on the company.

Anthony Noto, an Internet analyst at Goldman Sachs, said that Amazon remains well capitalized and his analysis shows the company ending the year with at least $715 million in cash.

``This company is well managed financially,'' Noto said. ``I have all the confidence in the world of Warren Jensen as their CFO.''