’s Late-Summer Bummer

Perhaps more than any other publicly traded Internet company,
represents to investors the vast potential rewards and risks of the

When the market is bullish on the Internet as a catalyst for
transforming the economy and creating wealth, shares of the online
retailer’s stock soar. This happened in April, when AMZN became one of a
small handful of Internet companies to close above $200 per share.

But when a new wave of jitters over Internet valuations or possible
interest rate hikes sweeps through the herd, AMZN tends to get trampled
in the selloff stampede.

Such has been the case during the market’s downturn in recent weeks.
AMZN shares closed Monday at $94, down 6% from Friday and 32.6% from
July 15. The online retailer’s stock is trading at less than half the
yearly high of $221.25 it reached in late April.

The worst, however, may be yet to come. was forced on Monday
to make an interest payment on $1.25 billion in debt that the company
sold in February. Further, as long as AMZN shares trade below the
conversion level that would allow the company to convert the notes for
stock, it must continue to pay interest on the debt. So what’s the
conversion level? Try $234.08, a price would have to reach at
least 20 out of 30 consecutive trading days to convert debt to stock.

Some analysts have dismissed the importance of the debt payment, noting
correctly that it won’t impact earnings expectations in ’99. However,
coming so soon after a quarterly report that showed dramatically
widening losses, the psychological impact on profit-anxious investors
could accelerate’s already precipitous plunge.

Like all other e-tailers, is looking forward to the fall,
when holiday shopping begins in earnest. Last year was a huge one for
e-tailers, and analysts expect an even better season in ’99.

Until then, there’s not much to support a turnaround — or even a holding
operation — for shares. August looms as a long month for the
e-tail king and its investors.

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