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Buffett's Amazon Drops on Missed Earnings

Share of Amazon.com Inc. (NASDAQ:AMZN) fell 2.32% in after-hour trading Monday after the online retail behemoth missed second-quarter earnings estimates.

Amazon, a holding of Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), reported $5.22 per diluted share, short of the $5.29 per share analysts expected. The figure topped earnings per share of $5.07 in the second quarter last year. Net income inched up to $2.6 billion from $2.5 billion a year ago.

The company's second-quarter revenue increased 20% from the prior year to $63.4 billion, beating estimates of $52.89 billion.

"Customers are responding to Prime's move to one-day delivery -- we've received a lot of positive feedback and seen accelerating sales growth," Amazon founder and CEO Jeff Bezos said. "Free one-day delivery is now available to Prime members on more than ten million items, and we're just getting started."

Strength in Amazon's cloud business, AWS, stumbled during the quarter. Its net sales grew 37% year-over-year, slower than its 49% year-over-year growth in the second quarter last year. AWS net sales reached $8.38 billion.

"AWS is being chose as a partner to many companes because of our leadership position in tech, our ecosystem and the stronger security that we offer," the company said in a conference call.

International growth also improved 12%, slowing from 27% a year earlier. Sales in North America surged 20% but cooled from 44% a growth reported a year ago.

Amazon ended the quarter with $22.62 billion in cash and cash equivalents, decreased from $31.75 billion at the end of 2018.

The company announced that its Prime Day on July 15 and 16, was the largest shopping event in its history, surpassing combined sales of its previous Black Friday and Cyber Monday. It had the most customers ever sign up for Prime membership on the first day of the colossal sales event, followed by almost as many signups on the second day.

Though traditionally considered a growth stock, Amazon was purchased by one of Berkshire Hathaway's portfolio managers, Ted Weschler or Todd Combs, in the first quarter. Buffett reported the position in May, calling himself an "idiot" for not purchasing it himself. Berkshire's stake in Amazon of 483,300 shares was valued around $860.64 million at the end of the first quarter. GuruFocus estimates its gain on the holding, based on Amazon's first-quarter average share price and closing price Thursday, stands around 18.8%.

For the third quarter, Amazon projected net sales between $66.0 billion and $77.0 billion, reflecting year-over-year growth between 17% and 24%. It also forecasted lower operating income, in the range of $2.1 billion to $3.1 billion, compared to $3.7 billion in the third quarter last year.

Amazon shares climbed 31% year to date, closing at $1,973.82 per share Thursday. It has a price-earnings ratio of 82.43, price-book ratio of 20.47 and price-sales ratio of 4.09.

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This article first appeared on GuruFocus.