 "Local flavours make a global Amazon")
Amazon was expected to run away with the holiday season. Instead, it merely strolled.
Revenue for the fourth quarter was a bit lighter than expected, the Seattle company reported on Thursday, and profit was a whole lot skimpier. Wall Street was crushed. The $24 billion or so that investors had added to the company's market value earlier in the day immediately vaporised, and then some.
Amazon prompts strong emotions, and they were on full display Thursday - first a faith that the company will indeed measure up to outsize expectations to be the store that sells everything to everyone everywhere, then the sneaking fear that that might be a dream.
Analysts said the fourth-quarter numbers, momentarily disappointing as they might have been, did not dent the optimistic case.
"This was more of an expectations correction than a fundamentals correction," said Mark Mahaney, an analyst with RBC Capital Markets. "There's nothing in the numbers that would mark a dramatic change in Amazon's growth or profit profile."
Instead, the mood swings just reflected an enthusiasm that got out of hand.
"The last three quarters the company generated bottom-line results that were materially above Street expectations," Mahaney said. "That set up expectations we would see more of the same. We didn't."
Revenue for the fourth quarter jumped to $35.7 billion, up 22 per cent from $29.3 billion. Impressive as that was, analysts had predicted a little bit more: $35.93 billion.
Profit is something Amazon has trained Wall Street not to expect. But part of the optimistic assumptions is that the moment is drawing nigh when the dollars will start to pile up. Analysts estimated the retailer would earn $1.56 a share in the quarter, up from 45 cents in 2014. But the company said its fourth-quarter profit was only $1 a share.
Investors, who had pushed Amazon shares up 100 per cent last year, partly in anticipation of those profits, sent the stock up another $52 to $635 in regular trading Thursday. When the results came in, they did not shrug them off. After-hours, the stock fell more than $84.
If Amazon disappointed, that needs to be seen in context. Traditional retailers, and even some e-commerce ones, are suffering. Walmart is closing 269 stores. Macy's is cutting 4,500 jobs and shutting dozens of stores. EBay just dashed expectations for the year.
Against such travails, a 22 per cent rise in revenue that was expected to be 23 per cent is inconsequential. When Walmart reports its holiday sales quarter, revenue is forecast to actually be down for the quarter from 2014.
Amazon's computing platform subsidiary, Amazon Web Services, contributed heavily to the bottom line. Operating income from that unit rose to $687 million in the quarter from $240 million in 2014. AWS will soon be a $10 billion business, company executives noted in a conference call with analysts.
Getting all the work done has required many new employees. Amazon's head count grew 50 per cent in the last year, to 230,000 full-time workers.
Amazon might be the powerhouse of e-commerce, yet paradoxically has only a small share of the global market - which is one of the things feeding enthusiasm for it. For Amazon bulls, there are so many more worlds to conquer.
In data assembled before the fourth-quarter results were in, the research firm eMarketer said Amazon had $71.8 billion in e-commerce sales over the last 12 months, an increase of 5.6 per cent from the previous 12 months. Walmart, by contrast, had revenue of $13.5 billion online during the period.
But Amazon's revenue pales against the worldwide e-commerce market, which eMarketer estimated as $1.672 trillion. "Amazon is gaining share as evidenced by 26 per cent unit growth, compared to our best estimate of 18 per cent for global e-commerce growth," Gene Munster, an analyst with Piper Jaffray, wrote in a note to clients after the quarterly numbers. The note was headlined "Investors Overreacting."
In the current quarter, Amazon has estimated that sales will grow 17 to 28 per cent. Operating income might be as little as $100 million, which would be less than last year, or as much as $700 million, which would be considerably more.
It was a forecast that allowed plenty of room for enthusiasm, as it also left open the possibility of disappointment.
©2016 The New York Times News Service
