Amazon profit quadruples
Amazon .com Inc. is the Web retailer that keeps on giving solid financial results. But Wall Street wasn’t in a receptive mood Tuesday.
The Seattle-based company predicted a record holiday season and said online shoppers sent its third-quarter revenue soaring 41% over a year earlier by snapping up all kinds of goods, including “Harry Potter” books, electronics and jewelry. Profit more than quadrupled.
“We are seeing customers reacting and responding to a very good customer experience,” Amazon Chief Executive Jeff Bezos said during a conference call with analysts.
Investors had anticipated a blowout quarter, sending the company’s shares up $9.53, or 10.4%, to $100.82 -- their highest price since 2000 -- before the earnings report was released. But concerns about a slowdown in profit growth reversed all those speculative gains as the stock tumbled 10.7% to $90 in after-hours trading.
Operating profit margin declined to 3.8% of global sales from 4% in the second quarter and 4.8% in the first.
Amazon’s performance, along with that of online auction leader EBay Inc., is closely watched as a bellwether of e-commerce going into the crucial holiday season, particularly as concerns grow over consumer spending.
Amazon had goosed expectations with impressive results in the first two quarters, raising optimism among investors hunting for growth opportunities amid the housing downturn and credit crunch. Amazon’s stock has surged sharply this year, trading at a price-to-earnings ratio much higher than those of other Internet and retail companies.
“People got ahead of themselves in their expectations,” Sanford Bernstein analyst Jeffrey Lindsay said.
He and other analysts remain bullish.
“Amazon is executing very well on its business model,” said Robert Toomey, an analyst with EK Riley Investments. “There are very few companies out there delivering this kind of growth.”
Its third-quarter net income rose to $80 million, or 19 cents a share, from $19 million, or 5 cents, a year earlier. Analysts had anticipated a profit of 18 cents a share.
Revenue climbed to $3.26 billion from $2.31 billion a year earlier. Helping stoke sales were commissions that Amazon charges independent merchants that sell on its website and a program that builds loyalty by offering free express shipping for a flat annual fee, which more than doubled its subscribers.
“Harry Potter and the Deathly Hallows,” the final installment in the blockbuster boy wizard series, worked some sales magic, becoming the fastest-selling book ever after its July release. Amazon sold 2.5 million copies but did not make a profit because it sold the books for steep discounts and offered free shipping. Such publicity stunts are important to keep shoppers coming back.
Amazon raised its full-year sales forecast to as much as $14.6 billion from an earlier high end of $14.3 billion.
Perhaps troubling investors was the company’s guidance for the fourth quarter, which some had hoped would be higher, said analyst Colin Sebastian of Lazard Capital. Amazon said it expected to report sales of $5.1 billion to $5.45 billion. Analysts had forecast sales of $5.16 billion.
A lot is riding on the sales haul in Amazon’s holiday sleigh.
“It’s difficult to say how the next couple of months will shape up,” said Scott Tilghman, an analyst with Soleil Securities-Hudson Square Research.
“We will have to see what kind of discounting the brick-and-mortars put in place to attract business into their stores. But Amazon.com certainly has the momentum supporting a solid outlook.”
