Amazon Corp. Disappoints Investors

by Dagmark Garcia | Wednesday, Feb 1, 2012 | 369 views

Internet shopping Giant Amazon Corp. declared its quarterly results which has disappointed investors across the board. Amazon’s stock dropped nearly $16.71, or 8.6 percent, to $177.73 in after-hours trading following the earnings announcement. The markets reacted negatively to the news with the stock. Amazon’s Q4 figures in the US, showing a 35% increase in revenue, to US$ 17.4 billion but the bottom line profits fell by 57% as Amazon restructured to compete in the online jungle, with expensive new sales hubs opening.

The company had to bear increase in costs due to promotion of their online company kindle. Margins also came under pressure due to increase in costs such as delivery charges and free shipping. Higher costs and expenses offset a 35pc increase in net sales to $17.43bn in the three months to Christmas – the company’s busiest trading period. The company has been in a comprehensive expansion plan to boost sales and capture market share but this has taken a toll on its books but to the fact such expansion requires massive capital funding.

Jeff Bezos, CEO of Amazon.com, said: “We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our best-selling product.

The company is however projecting a robust sale pattern as it hopes the investment into kindle will help it to leverage its earnings. Sales of its Kindle tablet computers and e-reader gadgets nearly tripled compared with the final quarter of 2010.  However the company has not given exact details of its sales.

Sales at Amazon’s media business, which includes books and DVDs, grew 15 percent to $6 billion. Sales from electronics and other general merchandise jumped 48 percent to $10.9 billion. We maintain a buy call on the stock if the investor has a holding period of twelve months and above.

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