Marianne Wolk of Susquehanna downgraded Amazon (AMZN 119.13, -1.87, -1.55%) to a neutral rating on Monday. In a note to clients, the analyst cited "intensifying competition" in the e-book market that is creating more uncertainty around the company's Kindle business. ...
"With moves pending by Apple and Google, rising competition is raising the uncertainty regarding eReader, eBook, and Book profit growth rates, capping the contribution to Amazon's valuation from these sectors," Wolk wrote. ...Wolk said she estimates that the e-book business -- both devices and content -- will contribute about 6% of Amazon's total revenue by 2014. She believes that e-books and physical book sales account for between 8%-13% of the company's valuation, which leaves the shares exposed as competition mounts in the sector.
"With news flow likely to raise uncertainty over the next 12 months, it is likely to reduce the multiples attached to the contribution from the Kindle and importantly lower the valuation on physical books, which should see slowing growth as eBooks accelerate," she wrote. ...
Wolke also noted the way the industry's gradual adoption of the Agency Model is likely to impact Amazon's bottom line.
