Amazon Tanks After Earnings: Were The Figures That Bad?

The figures are out. So how did Amazon.com (Nasdaq: AMZN  ) fare with its latest round of digits?

Fourth-quarter sales jumped 35% to $17.43 billion, which was light of the $18.2 billion that the Street was modeling for. Backing out some favorable foreign exchange-rate effects knocks off one point from that growth rate. On the bright side, looking at the bottom line wasn't nearly as gloomy as analysts had expected. Net income fell by 58% to $177 million, or $0.38 per share, which is double the $0.19 consensus estimate.

For the full year, revenue jumped 41% to $48.08 billion, while net income soared 45% to $631 million, coming out to $1.37 per diluted share. Operating income fell by 39% to $862 million.

Over the booming holiday season, Kindle unit sales, including the Google (Nasdaq: GOOG  ) Android-running Kindle Fire, jumped 177% over last year, meaning the lineup's unit sales nearly tripled. Amazon said the Fire is the "No. 1 bestselling, most gifted, and most wished for product" on the site.

That's about as close as you'll get to any juicy details on Kindle Fire unit sales, since Amazon is notoriously mum on that front. Analysts have been estimating upwards of 6 million Fires shipped during the fourth quarter, which may not stack up well next to the 15.4 million iPads that Apple (Nasdaq: AAPL  ) just moved, but trounces its Android brethren. For example, Motorola Mobility (NYSE: MMI  ) just announced 200,000 tablets shipped last quarter, taking all year just to reach six figures in shipments.

Shares are down almost 8% in extended trading as of this writing. What are investors so jittery about? The top-line miss is one thing, for starters. But first-quarter guidance also warns that Amazon may see an operating loss between $200 million and an operating income of $100 million. That range represents a declines 162% and 69%, respectively.

While that sounds a little ominous, remember that Amazon said the exact same thing last quarter, predicting between an operating loss of $200 million and income of $250 million for the fourth quarter. From that perspective, Amazon topped its guidance, since the quarter's final operating income tallied up to $260 million.

I'll parse through the figures a little more deeply tomorrow, but for now the digits really don't strike me as all that bad. Although I did have a hunch that shares would tumble due to all the sinister language about plunging metrics.

What do you think? Are you disappointed with Amazon's results? Or do they kindle your fire? Share your thoughts in the comments box below.

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Fool contributor Evan Niu owns shares of Apple and Amazon.com, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Amazon.com, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Amazon.com, Google, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. 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.


Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 01, 2012, at 2:44 AM, monkeywrenchgirl wrote:

    Don't trust the Kindle hype. Investigate.

  • Report this Comment On February 01, 2012, at 3:34 AM, goalie37 wrote:

    As a shareholder of AMZN, I have seen this type of thing play out before. The traders see a top line miss, while I see 35% growth. Whenever anything "bad" comes out on the company, the overreaction can be quite extreme, resulting in what is usually a very short lived buying opportunity.

  • Report this Comment On February 01, 2012, at 5:17 AM, H3D wrote:

    As of yesterday amazon had TTM earnings of $866m and the market was allowing it nosebleed valuation with a P/E of 102 giving a capitalisation of $88.4 and a share price of $194

    This morning Amazon will open with TTM earnings of $631 million.

    Unless the P/E is allowed to rise further, absurd considering the slowing revenue growth, then for a P/E of 100 Amazons share price needs to drop to $138.7

    But that's not all.  Amazon guided $100m profit to $200 loss this quarter.  That is down from $201m profit Q1 last year.

    We can price in the best case now.  In three months time, if Amazon hit their top end expectation, and keep the PE of 100, then a capitalisation of $53.1 B means a share price of $116.7

    The mid point would give a share price of $83.7

    And Amazons low end prediction would give a share price of $50.8

    And remember, all of that is if they keep their nosebleed P/E of 100

    Amazon is an excellent business.  But it's current share price is absurdly high.  

    A 9% drop doesn't come close to fixing that.

  • Report this Comment On February 01, 2012, at 1:33 PM, WildTing wrote:

    Agree with H3D. I actually feel like AMZN and NFLX have some similarities... I'm questioning AMZN's business model. A lot of the great things they offer aren't (very) profitable. Great if it's priced right, but it's not at a PE of 100. Hope it tanks like NFLX and I can buy in, because I love the company.

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