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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 (NASDAQ: AMZN  ) 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.

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Comments from our Foolish Readers

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  • Report this Comment On February 02, 2014, at 2:16 PM, FACOID wrote:


  • Report this Comment On March 03, 2014, at 10:09 PM, notbullorbear wrote:

    This isn't rocket science. Read the Amazon blogs. First, they signed up a legion of followers with Prime 2 day's no longer widely available and now you pay for 3-5 day delivery...but only business what used to arrive in two days now arrives in 7. Second, they roped people in with the ability to download media content to the kindle, Ipad or PC. Problem is, once you download it, you can't always watch it unless you are connected to a wireless network. Confusing - yes, 2 day Prime delivery is no longer available and the offshore customer service team has no idea what is going on - they say you didn't check the correct box...there is only one box available. 3-5 day free shipping. And downloaded videos? Even worse is they are silent on the issue despite the blogs lighting up on these issues. So they fail on two counts - advertising something they can't deliver and not being nimble to correct the issue. Big sell in my book - but luckily I never invested because I wasn't sure how they could be profitable with the shipping....For the past few years I have ordered from amazon around once a week but the delivery issues are too frustrating. What was once automatic is now usually disappointing.

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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