Shares of Amazon.com
Net sales climbed 39% to $7.56 billion. Earnings inched a mere 16% higher to $0.51 a share, but the results were still better than expected. Analysts were targeting a profit of $0.48 a share on $7.35 billion in net sales.
In other words, Mr. Market knew all about the margin contraction. The moment that Amazon decided to take on Borders
The market's problem came largely from Amazon's guidance. The midpoint of its net sales range for the holiday quarter is actually ahead of the $12.3 billion that Wall Street was looking for, but the midpoint of its admittedly wide range for operating income is actually a year-over-year decline.
Save your "ouch" for a company that needs it. When you're selling beefed-up Kindles for as little as $139, this isn't a time to be counting pennies.
Investors seemed to get it with Netflix
We really don't see this at Amazon, because the company has been reluctant to spill the beans as to how many Kindles it has actually sold. We know it's in the millions -- and nothing more.
A little clarity out of the e-tailer would help. It has never had a problem widening the breadth of its digital books initiative. You don't need a Kindle to read a Kindle book these days, as most smartphones, tablets, and PCs will do. Amazon just announced Kindle book availability on Research In Motion's
Let's appreciate this quarter for one of two things that will pay off in the long run.
- Amazon is selling a ton of Kindles, hence the iffy operating margins.
- Amazon has excellent momentum heading into the crucial holiday selling season.
This is about something bigger than where operating margins clock in during the next three months.
Were you disappointed in Amazon's report or the market's reaction? Share your thoughts in the comment box below.
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Longtime Fool contributor Rick Munarriz has been shopping online since the early 1990s, even before Amazon.com was around. He does not own shares in any of the stocks in this article, except for Netflix. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.