Amazon willing to sacrifice margins to expand: baird analyst

AMAZON is doing so well it can afford to sacrifice some margin growth as it expands into digital media, Robert W. Baird senior research analyst Colin Sebastian told CNBC Tuesday.

"They're willing to sacrifice their margins near term to build more scale across all of their business lines, including the third-party marketplace," said Sebastian, who has

an "outperform" rating on the stock. "But long term, this is obviously a significant opportunity to focus on long-term free cash flow generation and that's what investors

should focus on." The Internet marketplace reports earnings after the market close Tuesday. Expansion into digital media could come at Netflix's expense. Netflix shares plunged

more than 30 percent after giving disappointing fourth-quarter guidance. Sebastian does not see an Amazon-Netflix merger on the horizon. "Amazon already has a signficant active customer

base, 140 million customers," he said. "They have agreements with studios in terms of content and don't think they're really interested in the physical DVD delivery

business in the U.S. I think pursuing their own organic growth strategy through the Kindle Fire, through their own website, is a more likely scenario." Analyst Tony Wible of Janney

Montgomery Scott speaks about Netflix's latest troubles here. ______________________________ _CNBC DATA PAGES:_ * Dow 30 Stocks—In Real Time * Oil, Gold, Natural Gas Prices Now *

Where's the US Dollar Today? * Track Treasury Prices Here ______________________________ _DISCLOSURES:_ Sebastian does not own shares but his company does own shares and makes a market

in Amazon securities. Disclaimer