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Despite record profits, Amazon shares plunge after company misses analysts' estimates

By midian182
Jan 29, 2016
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  1. Few companies could post the best quarterly profits in its history and still see its share prices drop. Unfortunately for Amazon, it is one such organization. The online retail giant missed Wall Street expectations on Thursday, causing shares to plunge 13 percent.

    Amazon’s Q4 report showed a net revenue of $35.7 billion and net income of $482 million, or £1.00 a share. This represents a 22 percent increase in revenue and a 125 percent increase in profit compared to the same period a year earlier.

    Amazon Web Services, meanwhile, continues to be a huge area of growth for Amazon. AWS saw its Q4 figures improve yet again in 2015; the cloud computing platform’s revenue jumped 70 percent to $2.4 billion while its profits rose a massive 186 percent $687 million.

    Despite the impressive figures and the fact that it’s the first time Amazon has reported three consecutive profitable quarters since 2012, the numbers weren’t as good as analysts had been expecting. Forecasts had Amazon bringing in just under $36 billion in sales and a net income of $754 million, or $1.56 a share, missing these targets resulted in the falling share price – down 13.43 percent to $550 per share in after-hours trading. But the shares are still up 80 percent over the past 12 months.

    Even with the record profits, investors are still cautious about putting their money into Amazon. "By comparative retail standards, Amazon's level of profitability is still painfully weak," said Neil Saunders, head of retail analyst firm Conlumino, speaking to Reuters. "For every dollar the company takes, it makes just 0.75 of a cent in profit."

    CEO Jeff Bezos didn’t appear too happy at missing the expectations, either. "Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100 billion in annual sales and serve 300 million customers," he said in a statement. "And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like day one."

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  2. poohbear

    poohbear TS Addict Posts: 104   +62

    It doesn't even make 1 cent for every dollar it sells? Wow, so that's 99.25% operating costs on each dollar they sell. That's rough and how long can they survive like that?
     
  3. ET3D

    ET3D TechSpot Paladin Posts: 1,178   +72

    Amazon has always put most of the money it earns directly into the business. The low profit simply means that it spends the money it gets, instead of hoarding it. Even so it probably has a pretty large buffer of saved money in case something goes wrong.

    In any case, so far it seems to work.
     
    Reehahs likes this.
  4. umbala

    umbala TS Addict Posts: 169   +145

    I love how the Wall street parasites are never satisfied. No matter how much profit a company makes for them they want more, more, more! It's never enough. I believe even Apple's share prices plummeted recently when they missed the expected forecasts. Even though Apple made BILLIONS in profits, they weren't satisfied. So this asinine reaction to Amazon's performance is no surprise at all. I never understood who these analysts were that seem to think they can predict just exactly how a company should perform and then cause hundreds of millions (or in some cases billions) worth of drop in their value, all because their magic eight ball was off!
     
  5. ET3D

    ET3D TechSpot Paladin Posts: 1,178   +72

    That's just their way of making money. The share price of a good company will rebound, but meanwhile this blip allows buying it low and making a profit.
     

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