AMZN Rises 7%: Street Shrugs off Op Loss Forecast

Shares of Amazon.com (AMZN) are up $15.22, or 7%, at $235.23, after the company last night reported Q2 revenue slightly below analysts’ expectations and forecast this quarter’s revenue below consensus as well.

While there was some slowing of growth in certain categories and regions, the only issue that might have been a real thorn for bulls was the company’s forecast for an operating loss of $50 million to $350 million this quarter, which is below the average Street estimate for $40 million, according to FactSet.

But that dimmer outlook matters little today, as analysts are inclined to appreciate the company’s need to spend on the business:

Daniel Kurnos, The Benchmark Co.: Reiterates Buy rating, and a $260 price target. Kurnos is unconcerned about the outlook for an operating loss: “The Q3 revenue consensus of $14.1 billion stands $500 million above the mid-point of the guidance range at $13.6 billion, but below the high-end of guidance at $14.3 billion. The bigger concern is operating income guided in a range of a $50-$350 million loss vs. consensus at $164 million as Amazon ramps spending in front of the holiday season, including increasing capacity build out from 15 to 18 FCs in 2012. We view the increased investment as a positive as it may indicate strong continued unit volume growth and should help drive further 3P adoption through FBA.”

Kevin Kopelman, Cowen & Co.: Reiterates an Outperform rating, noting the company’s “strong growth” in North America, helped by sales of media. Kopelman is not concerned about the lower operating profit outlook, writing “Amazon’s Q3 non-GAAP operating profit guidance of $(75)-225 million was below our expectations as the company builds out ahead of the Q4 holiday season” but “Amazon has also beaten the high end of its profit guidance for three straight quarters.” Kopelman raised his year revenue outlook to $61.87 billion from $61.07 billion, while cutting his EPS estimate to $1.37 from $2.11.

Kerry Rice, Needham & Co.: Reiterates a Hold rating. Rice, like Kopelman, thinks the operating profit outlook is not a big deal, writing that “we believe investors have become indifferent to Amazon�s high investment levels. Of note, gross margin reached the highest peak in 7 years, which may be sustainable [�] We believe the Amazon story boils down to e-commerce demand, which we expect to remain solid despite FX headwinds. Amazon continues increasing customers and volumes at a solid clip of 25% and 43%, respectively. 3P business is growing faster than its core business and now accounts for 40% of units shipped, up from 36% in 2Q11. We expect solid 2H e-commerce spending as consumers turn to the Internet (desktop and mobile) for back to school and holiday seasons.