Although Amazon.com revenues increased by 35% to $17.4 billion in the fourth quarter ending December 31, Wall Street had expected at least $1 billion more. As a result--and despite net income of $177 million, down 45% but higher than expected--the e-tailer's stock fell 9%, to $177, in after-hours trading yesterday. Investors were spooked, too, by the company's prediction that in the current quarter revenues will be between $12 billion and $13.4 billion, an increase of 22%-36%, but below analysts' consensus of $13.42 billion.
The New York Times noted other reasons for investors' concern about Amazon: a sense that some Internet stocks' phenomenal growth rate will slow, as may be happening with Google; video game sales were "lackluster"; floods in Thailand created supply problems; and "maybe there was a bit of a backlash."
Concerning the backlash, the paper cited Amazon's price-checking app deal in December and noted, "Booksellers, who have long felt themselves in the retailer's cross hairs, were particularly offended. A tentative 'buy local' movement sprang up."
Analysts weighed in with different takes on the company. "With the valuation Amazon is carrying, you got to perform," Colin Gillis of BGC Financial told the Times. "You've got to be like Apple--smash through the numbers people are afraid even to whisper. Instead, they're only making slightly over a penny on every dollar in revenue. That's pathetic in any industry."
On the other hand, Scott Devitt of Morgan Stanley, commented: "The long-term story is very much intact." That story is the company's consistent strategy of emphasizing growth rather than earnings.
In the last year, Amazon has invested heavily in new warehouses, and the number of employees grew 67%, to 56,200 full- and part-time workers. Operating expenses during the year grew 38%, to $17.2 billion.
