Amazon profit forecast disappoints, stock slumps
By Alistair Barr
(Reuters) - Amazon.com Inc shocked investors with a far weaker-than-expected outlook for the crucial holiday season quarter as it spent heavily on its new Kindle Fire tablet computer.
The stock tumbled 12 percent Tuesday in extended trading as the news raised concern that Amazon was losing some of the revenue momentum that had helped investors overlook its razor-thin profit margins.
Amazon forecast fourth-quarter revenue of $16.34 billion to $18.65 billion, compared with analysts' average estimate of $18.15 billion as compiled by Thomson Reuters I/B/E/S.
Amazon's forecast would mean 27 to 44 percent growth from a year earlier. In the third quarter, sales grew 44 percent, less than the 51 percent gain in the second quarter.
The company also said it could report a $200 million operating loss to a $250 million operating profit in the holiday quarter as it spends on the Fire and other initiatives.
That forecast, which includes $200 million for stock-based compensation and intangible assets, was "materially" below Wall Street expectations, according to UBS analysts Brian Pitz and Brian Fitzgerald. They were looking for $374 million in operating profit in the fourth quarter.
"We're not seeing the investment pay off yet, but I think investors are impatient as to how long will it take before you will start to see this pay off," Evercore Partners analyst Ken Sena said. "When are we going to start to see some signs?"
Amazon's fourth-quarter forecast implies a profit margin of "effectively zero," Youssef Squali, an analyst at Jefferies & Co, noted during a conference call with the company. Continued...