Last updated: February 12, 2014 9:58 pm

Amazon weakens on consumer flight fears

Shares in Amazon weakened on Wednesday after a new survey from investment bank UBS showed contemplated price increases to the company’s Prime service would lead to consumer flight.

The report showed a steep decline in the likelihood current Prime users would renew their membership if Amazon increased its prices by $20 or $40 annually, a move the retailer said it was considering on a call with analysts in January.

Amazon has priced its Prime service, which offers consumers free two-day shipping as well as access to its online entertainment offerings, at $79 for the last nine years.

UBS analyst Eric Sheridan downgraded the online retailer to neutral from buy and lowered his price target to $375 from $450.

“The overwhelming reason for members leaving Amazon Prime in the past was due to costs,” Mr Sheridan said. “Specifically, 74 per cent of survey subjects who had previously ended their Amazon Prime membership did so because of cost concerns, with lower levels of usage, shipping and other also provided as reasons for non-renewal.”

Shares in Amazon declined 3.5 per cent to $349.25.

Rising demand from the construction industry helped polish profits at Owens Corning, a maker of residential and commercial building materials.

Shares in the company surged 15 per cent at one stage to a new record high, as sales rose 10 per cent from a year earlier to $1.28bn. It also said it would pay a dividend for the first time in more than a decade. The shares closed 8.7 per cent up at $43.20.

Owens Corning swung to a profit of $82m, or 69 cents per diluted share, compared to a loss of $56m a year earlier. Wall Street analysts had forecast earnings of 27 cents per share on sales of $1.21bn.

Chief executive Mike Thaman said the company’s insulation business returned to profitability in the quarter and roofing would “deliver another strong year” in 2014.

Online travel recommendation site TripAdvisor reported a 26 per cent rise in fourth-quarter sales, as traffic to its websites jumped 50 per cent in the final three months of the year.

The company said sales reached $213m during the period as click-based advertising, which generates the bulk of TripAdvisor’s sales, rose 17 per cent from a year earlier.

Profits slid 40 per cent to $20m, or 14 cents per share. The company, which generated 2bn unique visitors over the year, blamed higher technology and marketing costs for lower earnings. The results follow stronger-than-anticipated figures from Expedia last week, which spun off TripAdvisor in 2011.

“We however believe that [TripAdvisor’s] scale, better traffic monetisation has the potential to carry multiyear tailwinds that more than offset the effect of natural traffic growth deceleration when exceeding 2bn users,” said Credit Suisse analyst Dean Prissman, who increased his price target on the company to $94 from $90.

TripAdvisor shares climbed 7.2 per cent to $90.27.

Thomson Reuters shares were under pressure following quarterly results, which showed a loss of $343m in the period compared to a profit a year earlier.

The Canadian-controlled financial and professional information company, which is in the midst of a turnround, said sales in its Financial & Risk group decelerated in the quarter and its expected restructuring costs would be higher than earlier thought.

Net sales fell 3 per cent to $3.28bn as gains in its tax and accounting division were more than offset by a slowdown in its legal and financial units.

Shares declined 6.2 per cent to $34.32.

Overall, equity markets drifted on Wednesday, following a strong rally the day before when Janet Yellen promised continuity at the Federal Reserve in her first testimony as chairwoman of the central bank.

The S&P 500 was little changed at 1,819.26 while the Dow Jones Industrial Average fell 0.2 per cent to 15,963.94. The technology heavy Nasdaq Composite advanced 0.2 per cent to 4,201.29.

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