Why Amazon.com Stock Tumbled
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 thesis.
What: Shares of Amazon.com were taking a dive today, falling 11% after posting weak fourth-quarter results.
So what: The market darling, which had soared during the last year, missed on all three counts: revenue, earnings, and guidance. Amazon said sales increased 20%, to $25.6 billion, but that was short of estimates at $26.06 billion as negative currency translation was partially to blame for the shortfall. Meanwhile, profits grew from $0.21 per share a year ago to $0.51, but that was also below estimates of $0.66. For the current quarter, the company expects top-line growth of 13% to 24%, and operating income near breakeven, both well off the Street's mark.
Now what: Amazon is known for conservative guidance and for providing ranges so wide as to be meaningless, so the above projections could prove to be a low bar for the online giant to hop over. Still, the major question for Amazon investors has to be how long the company can keep its lofty growth rate. CEO Jeff Bezos is well-known for bucking short-term expectations in favor of long-term sacrifices, but at a certain point, the company will have to show meaningful profits. Gross margin continues to improve, meaning Amazon is headed in the right direction, but breakeven net income for the current quarter would be a huge disappointment as Wall Street is expecting a $0.54 per-share profit.
How Amazon is transforming retail
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.
The article Why Amazon.com Stock Tumbled originally appeared on Fool.com.Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns 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. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.