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Amazon Q4 forecast disappoints

By Reuters
San Francisco, 24 Oct 2014

Amazon's sales projections for the crucial holiday quarter disappointed Wall Street and third-quarter results missed forecasts, sending the online retailer's shares 9% lower yesterday.

After an unusually busy first half of the year that saw the online retailer spend on developing everything from mobile phones and Hollywood-style production, to grocery deliveries, investors were ready to see it curtail its ambitions and start delivering sustainable profits.

But not only did it post a much larger loss than expected, Amazon also projected 7% to 18% revenue growth over the busiest shopping period of the year, a far cry from the 20%-plus pace that had convinced investors to overlook its persistent lack of profit in the past.

"That kind of takes the top line growth story off the table. And now they've got to deliver on profit margins," said Rob Plaza, senior analyst at Key Private Bank.

"Because of all that money they need to spend to drive growth, it becomes an expensive proposition."

Thursday's after-hours share losses wipe more than $15 billion off Amazon's market value. The stock had already been down 13% since Amazon's last quarterly results announcement in July, when it also missed targets and ignited a debate about its free spending ways.

Some analysts fear the US holiday shopping season, the biggest quarter for most retailers, might turn out weaker than anticipated.

Amazon projected on Thursday net sales of between $27.3 billion and $30.3 billion for the holiday quarter, lagging the $30.89 billion analysts had expected on average.

CFO Tom Szkutak told reporters a stronger dollar had reduced its fourth-quarter revenue forecast by about 2.5% points. A stronger dollar means overseas revenue translates to less in the home currency.

He added Amazon sales in Japan in the third-quarter failed to recover from their second-quarter decline.

The earnings report comes about a week after e-commerce rival eBay trimmed its own full-year revenue outlook due in part to the stronger US dollar.

For the just-finished third quarter, Amazon missed on virtually every metric that Wall Street tracks.

Its third-quarter net loss widened to $437 million or 95 cents per share in the third quarter, from $41 million a 9 cents a year ago. That came in larger than forecasts for a loss of 74 cents a share.

Revenue also fell short of expectations. Net sales rose to $20.58 billion, but that lagged forecasts for $20.84 billion, according to Thomson Reuters.

Shares in the company slid more than 9% to $284 in extended trade.

"It was an ugly quarter," Plaza said.

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