The expectations game, again--different protagonist, different results:
Profits down, stock goes up.
Despite missing analysts' earnings estimates for the fourth quarter -- by a country mile, actually -- Amazon's stock traded up significantly in after-hours trading. Amazon's net income fell 45 percent to $97 million, or 21 cents per diluted share, compared with $177 million, or 38 cents a share, for the same period a year ago.
In the quarter, which ended December 31, Amazon continued its double-digit sales growth with sales up 22 percent to $21.27 billion.
That fell short of the average earnings estimate of 29 cents-per-share. How to explain the initial burst of investor enthusiasm? A few possible explanations.
Over the years, some on Wall Street have expressed reservations about Amazon's high investment each quarter, worrying about the impact on margins. But although operating expenses climbed 22 percent in the quarter, Amazon's cost of sales as a percent of revenue actually dipped to 75.8 percent from 79.3 percent a year earlier.
Operating margins also rose to 1.9 percent from 1.3 percent, another sign of improvement.
Of interest to readers:
"We're now seeing the transition we've been expecting," CEO Jeff Bezos said in a statement. "After 5 years, eBooks is a multi-billion dollar category for us and growing fast -- up approximately 70% last year. In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just 5%. We're excited and very grateful to our customers for their response to Kindle and our ever expanding ecosystem and selection."
A bit of sleight of hand there; good ebook sales growth over the whole year contrasted to low pbook sales growth in december.
Methinks there is a definite plateauing in ebook growth; it's not killing them, but they're not eager to talk about it.