Amazon's holiday-quarter forecast disappoints, shares dive

Thu Oct 23, 2014 6:03pm EDT
 
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By Deepa Seetharaman

SAN FRANCISCO (Reuters) - Amazon.com Inc's (AMZN.O: Quote) sales projections for the crucial holiday quarter disappointed Wall Street and third-quarter results missed forecasts, sending the online retailer's shares 9 percent lower on Thursday.

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 percent revenue growth over the busiest shopping period of the year, a far cry from the 20 percent-plus pace that had convinced investors to overlook its persistent lack of profit in the past.

"That kind of takes the topline 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 of Amazon's market value. The stock had already been down 13 percent 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 that the U.S. 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.   Continued...

 
A worker walks past Amazon Fresh delivery vans parked at an Amazon Fresh warehouse in Inglewood, California, June 14, 2013. REUTERS/Jonathan Alcorn