Amazon Quarterly Earnings Fall 43%

Amazon.com Inc. said Thursday that its quarterly profit fell 43% in its crucial holiday-oriented fourth quarter and revenue missed Wall Street expectations, sending its shares down 8% in after-hours trading.

The online retailer said net income was $199 million, or 47 cents a share, compared with $346.7 million, or 82 cents, in the year-earlier period. Sales rose to $2.98 billion from $2.54 billion.

Sales missed analysts’ target of $3.08 billion.

Amazon also forecast first-quarter revenue of $2.14 billion to $2.29 billion; Wall Street on average had expected $2.28 billion.

“I’d say it’s disappointing because it’s continuing to show a revenue deceleration in terms of the 2006 guidance that they’re giving,” said Martin Pyykkonen, an analyst at Hoefer & Arnett. “Their guidance is somewhere between 16% and 23% revenue growth. Their range they are giving is more toward the low end of the Street estimates that are currently out there.”

Many on Wall Street have been concerned that Amazon.com’s operating margins would be unduly strained by shipping program Amazon Prime, which charges $79 annually for unlimited two-day shipping.

The Seattle-based retailer, the second-most-popular Web commerce site, behind EBay Inc., also faces increasing competition from the online sites of brick-and-mortar retailers such as Wal-Mart Stores Inc. and Target Corp.

Shares of Amazon, which closed at $42.74, down $1.24, on Thursday, fell an additional $3.54 to $39.20 in after-hours trading. The shares are down from a 52-week high in December of $50.

Shares trade at 59 times estimated 2006 earnings and are valued more in line with Internet stocks than retail stocks. Amazon’s price-to-earnings ratio is more than triple that of the Standard & Poor’s retailing index and the S&P; Consumer Discretionary 25.

EBay and Target, by comparison, trade at 42 times and more than 20 times estimated 2006 earnings per share, respectively.