NEW YORK – According to independent analysts Paulo Santos, the perception that Amazon (NASDAQ:AMZN) is a growth company is not exactly accurate. In a recent article, Santos claims that the market keeps ignoring Amazon’s sluggish performance in several key areas including revenue growth; which has been declining in percentage terms and real dollar terms in recent quarters.
Santos points out that revenue growth has flattened and even declined since the fourth quarter of 2011, and that and the quarter-on-quarter numbers look worse than the year-on-year numbers. Based on this, Santos says that a continuation of the trend will eventually hurt most of the company’s investors as slowing revenue growth has not been implied in Amazon’s revenue estimates, where the company tries to paint a brighter future.
In fact, revenue estimates shows a reacceleration of revenue growth in dollar terms. If this does not happen, and there is some reason to believe the fourth quarter this year will be extremely bad for retailers, then Amazon will only achieve 20.5 percent growth for 2013. That is almost 4 percent lower than the company’s estimates and would equal almost $ 700 million in lost revenue for the year. In 2014, the potential delta is even bigger, almost 12 percent of the company’s estimates, or approximately $ 4 billion in lost revenue.
It appears that Amazon is aware of this, at least internally as the company opted not to hold a launch event for their new Kindle Fire HDX. Furthermore, the new Kindle Fire HDX is not selling as well as its predecessors, and this could be a harbinger of things to come.
In addition, inventory is becoming a growing concern for the online retailer. In fact, the company’s inventory turns are starting to resemble Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST). As inventory turns regress to industry norms, Amazon loses one of its key advantage over traditional retailers.
For investors, now is the time to take a deeper look at what value, if any, Amazon can bring them. Declining revenue growth, slow sales of marquee products, and increased inventories could create significant risk for investors in 2014. Shares of Amazon will open the week just off its 52-week high at $ 319.04.