Amazon posts lower 4Q net income but stock jumps

Published on NewsOK Modified: January 29, 2013 at 6:17 pm •  Published: January 29, 2013
Advertisement
;

NEW YORK (AP) — Amazon's fourth-quarter net income fell 45 percent, as sharply higher revenue failed to keep pace with increased spending on order fulfillment and digital content, a trend that's become the norm for the world's largest online retailer.

The company's financial results missed Wall Street's expectations — but investors sent the world's top online retailer's stock up more than 9 percent in after-hours trading.

"It boggles the mind," said BGC Financial analyst Colin Gillis, who attributed the stock price jump to slightly stronger-than-expected operating income. "A lot of people scratch their head at the valuation given to Amazon and the support the stock has."

The company says it has been investing a lot of its income into enhancing its distribution network, its shopping website and its Kindle business as part of a long term growth plan. It opened 20 order fulfillment centers in 2012, bringing the total to 89 worldwide.

Amazon's profit margins have been thin because of heavy investments —and the deep discounts the company offers consumers. Even so, investors continue to be more than forgiving. Its stock price gained 45 percent in 2012. It has risen another 4 percent so far this year.

Amazon.com Inc. said Tuesday that it earned $97 million, or 21 cents per share, in the October-December period. That's down from $177 million, or 38 cents per share, in the same period a year earlier.

Revenue for the crucial holiday quarter grew 22 percent to $21.27 billion from $17.43 billion.

Analysts had expected earnings of 28 cents per share on revenue of $22.26 billion, according to a poll by FactSet.

"We're now seeing the transition we've been expecting," said Jeff Bezos, founder and CEO, in a statement. "After five years, eBooks is a multi-billion dollar category for us and growing fast — up approximately 70 percent last year."

In contrast, he added, sales of paper books saw the lowest December growth rate in the company's 17 years as a book seller — up just 5 percent.

Though revenue fell short of expectations, Cantor Fitzgerald analyst Youssef Squali said Amazon's profit margin was much better than expected at 24.1 percent compared with 20.7 percent a year earlier. This could signal that Amazon is starting to reap some benefits from its investments.

Continue reading this story on the...