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Amazon.com (AMZN) Tumbles on Earnings Miss

By: , dated July 25th, 2014

Shares of Amazon.com Inc. (AMZN) were trading down -36.00 or -10.04 percent to $322.61 per share in pre-market trading early Friday, after the company released significantly lower than expected earnings despite a large increase in revenue. Amazon stock closed at $358.61, up +0.47 or +0.13 percent in Thursday’s regular trading session.

Seattle, Washington based Amazon.com Inc. is the world’s largest online retailer. The company, founded as Cadabra in 1995 by Jeff Bezos was originally started as an online bookstore, but later diversified into DVDs, CDs, software, video games, clothing, toys, food and jewelry. The company also makes consumer electronics products such as the Kindle e-book reader and the Kindle Fire tablet computer. Amazon.com employs over 117,000 people worldwide and earned net income of +$274.0 million on $7.4 billion in revenue in 2013.

Amazon reported a net loss of -$126 million, or $0.27 per diluted share in the second quarter, versus a net loss of -$7 million, or $0.02 per share in the same period one year ago. Nevertheless, net sales increased to +$19.34 billion, versus +$15.7 billion in 2013’s second quarter, a 23 percent increase.

Operating loss came to -$15 million in the second quarter, versus operating income of +$79 million in the same period one year ago. Amazon’s foreign operations provided the company with a favorable year on year exchange rate impact of +$31 million, which partially offset the operating loss. The analyst consensus was for the company to lose -$0.14 per share on revenue of +$19.34 billion.

Jeff Bezos, Amazon founder and Chief Executive Officer said in a press release, “We continue working hard on making the Amazon customer experience better and better. We’ve recently introduced Sunday delivery coverage to 25% of the U.S. population, launched European cross-border Two-Day Delivery for Prime, launched Prime Music with over one million songs, created three original kids TV series, added world-class parental controls to Fire TV with FreeTime, and launched Kindle Unlimited, an eBook subscription service. For our AWS customers we launched Amazon Zocalo, T2 instances, an SSD-backed EBS volume, Amazon Cognito, Amazon Mobile Analytics, and the AWS Mobile SDK, and we substantially reduced prices. And today customers all over the U.S. will begin receiving their new Fire phones — including Firefly, Dynamic Perspective, and one full year of Prime — we can’t wait to get them in customers’ hands.”

As can be noted from Bezos’ statement, Amazon.com has had an extraordinarily busy year. In 2014 the company has launched several services for document sharing and music streaming, as well as a video set top box for video streaming, a wand for grocery shopping from home and is set to release its new Fire phone.

While Amazon continues to spend revenue on new ventures, the company’s cloud services is one of the fastest growing segments of its business. According to Amazon, cloud service usage is up +90 percent this year. Amazon’s “other” revenue, which includes its cloud facility was +$1.17 billion, an increase of +38 percent over the same period last year. However, the company has cut prices for its cloud services from 28 to 51 percent.

Amazon stock has been trading in a range between $280 and $408 per share over the past year. Despite the myriad of products and services, the company continues increasing revenue without showing a substantial profit, which has put pressure on the stock’s price. Investors have expressed their opinion in this morning’s premarket.

Other News About Amazon
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Amazon: Expect $200, Not $400
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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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