Amazon.com (AMZN)

Amazon.com (AMZN - Analyst Report) is one of the largest online retailers in the world and despite its high market share continues to grow strongly. However, the company's decision to significantly increase the number of fulfillment centers to cater to demand across different markets will likely continue to negatively impact its earnings.

Stiff competition and the corresponding negative impact on prices are also expected to continue. We expect that current investments will drive the next growth phase, but it is not clear how long this investment phase will continue, which makes us incrementally cautious.

We are therefore downgrading the shares from Neutral to Underperform. Amazon.com's current trailing 12-month earnings multiple is 136.2X, compared to the 38.0X average for the peer group and 14.3X for the S&P 500. Our target price of $166 represents 126.7X our 2011 earnings estimate.

Amazon.com (AMZN) : FULL ANALYST REPORT

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Amazon.com (AMZN)

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