Amazon Shares Plunged: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Internet retailing giant Amazon.com (NAS: AMZN) were getting hammered by investors today, falling as much as 12% in intraday trading after the company reported fourth-quarter earnings.
So what: Sales good, profits bad. Or at least that might be the caveman coverage of Amazon's fourth quarter. Amazon's sales for the final quarter were up 35%, clocking in at $17.4 billion. Net income, however, sank 58% to $177 million, while earnings per share dropped from $0.91 in the fourth quarter of 2010 to $0.38 during the quarter just passed.
Interestingly, while on an absolute basis the sales results looked better than profits, when we stack the quarter up to Wall Street's expectations, it was actually the earnings that shone. Comparatively, at least. Analysts were looking for $0.19 in per-share profit on $18.2 billion in sales, so the $0.38 in earnings per share that Amazon reported was significantly better than anticipated.
Now what: But what do investors care of things past? The fourth quarter is ancient history! Much of the decline in shares today likely has to do with the fact that the company said that it may end up reporting a $200 million operating loss for the first quarter of this year.
Is that worrisome? Well, it's not great news. But as my fellow Fool Evan Niu pointed out, that lackluster profit projection has a lot more to do with Amazon's investment in the future of its business and very little to do with its underlying current business deteriorating. And that's a pretty comforting thought.
Now if only Amazon would quit being so dodgy about releasing Kindle sales figures.
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At the time this article was published The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.
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