Are e-commerce companies getting too big for their britches?
Investors and analysts are wondering just that, with e-commerce giants such as Amazon.com and eBay seeing their margins decline while they expand at a breakneck pace. As a result, Wall Street has been punishing both companies’ stocks. In the wake of this week’s financial reports, both companies were downgraded by a host of analysts. At least five brokerages lowered Amazon from their top ratings, while two others downgraded eBay. Merrill Lynch, for instance, moved Amazon down a notch on its ratings. Despite the company’s increased number of customers and lower customer acquisition costs, Merrill Lynch cited the company’s continuing losses as a reason for a change in the outlook. “We continue to be discouraged by…a steady increase in our loss estimates without a correspondingly large increase in revenue or profitability estimates,” Merrill Lynch analyst Henry Blodget wrote in a report on Amazon. “Bottom line, it continues to cost Amazon more than we ever imagined to generate revenue,”
