Amazon CEO Jeff Bezos holds up the new Kindle Fire as he speaks at a news conference during the launch of Amazon's new tablets in New York last September.Reuters
Amazon.com Inc. shares slumped after the largest Internet retailer said it may lose money in the first quarter, a sign the company is continuing to spend heavily on expansion and new ventures.
The online retailer has been growing at least twice as fast as the e-commerce sector in recent years. To keep up that pace, the company is expanding into new categories and regions, spending heavily on growth and crushing profit margins.
Amazon's first-quarter forecasts suggest the company may continue this heavy investment, at the expense of shorter-term profit.
"Amazon is not a cheap stock, so any type of disappointment, we typically see a pretty meaningful reaction by the market," James Lee, analyst at Credit Agricole, said.
Amazon was expected to make $426.5-million (U.S.) in the first quarter of 2012, according to a survey of six analysts by Thomson Reuters. These estimates include stock-based compensation and other expenses.
Amazon said fourth-quarter net income was $177-million, or 38 cents per share, down from $416-million, or 91 cents per share, a year earlier.
Revenue came in at $17.43-billion, up 35 per cent from the fourth-quarter of 2010.
Amazon forecast first-quarter operating results ranging from a loss of $200-million to a profit of $100-million. That includes about $200-million for stock-based compensation and other expenses.
"Margins beat, but the outlook was disappointing on both top line and bottom line," said Ken Sena, an analyst at Evercore.
Amazon forecast first-quarter revenue of $12-billion to $13.4-billion. Wall Street was looking for $13.4-billion, according to Thomson Reuters I/B/E/S.
Amazon shares dropped 8.1 per cent to $178.70 in after-hours trading following the results.
More to come