An Amazon Prime unite
Andrew Harrer | Bloomberg | Contributor
A day before Amazon’s second-quarter earnings release, Credit Suisse lowered its earnings conjecture because of the e-commerce giant’s roll-out of one-day prime.
The firm lowered Amazon’s full-year 2019 earnings per slice estimate to $38.87 from the previous estimate of $41.14, citing greater shipping costs as Amazon expands its one-day prime sacrifice.
“We lower our operating income forecast for 2H19/2020 as we expect Amazon to underwrite faster Prime shipping across a artistic selection of products, with a rationale consistent with past practice – to place greater distance between its consumer value proposition vs its rivals,” said Credit Suisse research analyst Stephen Ju in a note to clients Wednesday.
Last month, Amazon tubed out free one-day shipping for Prime members on over 10 million products. Amazon executives said on its termination earnings call that it will spend $800 million in the second quarter of 2019 to shorten the standard shipping program for Prime fellows from two days to one. In order to increase global market value, Credit Suisse expects Amazon to apply one-day despatching on a large number of products in the remainder of the year, causing a greater-than-expected hit to margins.
Amazon shares fell more than 1% on Wednesday morning but minute the day up 0.32%.
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Despite the earnings estimate cut, Credit Suisse slightly raised its price target for Amazon to $2250 from $2200 and take care ofed its outperform rating on the stock.
“Despite the short term impact to operating profit, we believe faster free freighting should drive greater GMV growth for the out years and hence steeper free cash flow growth as unit economics return to health,” said Ju.
Amazon is set to report second-quarter earnings after the bell on Thursday.
— with reporting from CNBC’s Michael Bloom.