Oh Henry. Merrill Lynch Internet analyst Henry Blodget rang us up last week to express some "frustration" about last week's column, in which we analyzed his analysis of Amazon.com's cash position. His primary beef was that we gave him insufficient credit for any skepticism he has expressed in the past. And to be sure, Blodget has long shown concern about the company's negative revenue-per-customer metric, which some investors view as the telling barometer of the company's heretofore build-it-and-they-will-come strategy. Primarily, Blodget objected to our use of the adjective "staunch" before the noun "bull," suggesting he was a less than staunch. His purpose in publishing a liquidity analysis, he explained, was simply to support the company's claim that it has plenty of cash.
On Wednesday, Blodget put out an e-mail, placing a valuation "floor" on Amazon shares at $8. He also passed along a copy of a "well-researched" Washington Post article that found cracks in Amazon's vendor support. OK, that sounds less than staunch. Would there be a downgrade in the offing?
But come Thursday, he was sporting long horns again. Not only was there no downgrade, but a rebuttal to the Post's story suggesting a possible vendor squeeze lurks. He stated: "Our position regarding Amazon's liquidity remains unchanged: 'comfortable, but on alert.' This view was the same for the vendors we spoke to...Therefore, we still consider a 'creditor squeeze' unlikely." What's more, he states that he will maintain his current ratings because he "does not expect the situation to get much worse."
While we applaud Blodget's intermittent flashes of skepticism and frankness, the bottom line is that his recommendations on the stock remain the equivalent of a short-term buy and a long-term strong buy. The easiest way for him to shed the "staunch" tag would be to lower his recommendations to Merrill's clients.
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