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Amazon Sees Conservative Growth for 2004

Amazon.com posted its first non-holiday quarterly profit late Tuesday, but the leading Internet retailer provided a conservative outlook for 2004.

Amazon.com reported a small profit of $15.6 million, or 4 cents a share, versus a net loss of $35.1 million, or 9 cents a share, a year ago. The company just beat analyst estimates, and in the past it has beaten the Street's expectations by wider margins.

But after excluding one-time items, Amazon earned $48 million, or 11 cents a share, beating analysts estimates by only one cent per share. On a pro forma basis, Amazon actually broke even.

Amazon's third quarter revenues grew to $1.1 billion, compared with $851 million for the same period, a year ago.

While Amazon eeked out a profit and voiced some concern about the future, the company has seen its shares triple in 2003.

Amazon has benefited from diversifying its product mix and continue to offer free shipping for most orders over $25. The company said third quarter revenues jumped in part, because it cut prices on some its most popular products, including books, DVDs, electronics and other items.

But while Amazon's business continues to show signs of strength, some Wall Street analysts are concerned about the recent run-up in the company's shares.

"After the recent climb and a third quarter that only met expectations on most lines, we believe the stock will trade down toward $50 and rate the stock a sell," wrote Lanny Baker, an analyst at Smith Barney.

But on Wednesday, Jeetil J. Patel of Deutsche Bank issued a research note saying his firm is reiterating its "BUY" investment rating with a 12-month price target of $69.

"We believe that underlying growth at Amazon is continuing along a solid upward trajectory driven by the company's Free Shipping offer as well as its hybrid internal-3rd party retailing strategy," Patel writes.

"We are raising our 2003 revenue forecast from $5.09 bn to $5.17 bn (up 31 percent Y/Y) and our 2003 EPS estimate goes from $0.58 to $0.60," writes Patel, adding Deutsche Bank is "holding our 2004 revenue forecast."

Amazon forecasted that its financial results will likely be in line with analysts expectations. The company says it expects to post revenue of $5.75 to $6.25 billion, a rise of between 10 and 20 percent over its revenue projections for 2003.

Amazon is expected to continue with its global expansion, adding to its recent openings of its Japanese electronics area and British kitchenware section.

"We expect more customers to turn to us for their holiday gifting needs this year -- producing our biggest holiday shopping season ever," Amazon CEO Jeffrey Bezos said in a statement.

Patel of Deutsche Bank said he's encouraged by Amazon's movement into several new retail sectors aggressively, including Sporting Goods, Health & Beauty and Home & Garden.