Amazon.com Inc. reports quarter three earnings today and analysts are expecting a loss of $0.75 per share according to FactSet. That’s a significant jump from their loss of $0.09 per share for the same period last year. Amazon follows a “profitless prosperity” model so losses aren’t unexpected, and typically Wall Street shrugs them off. This year, however, Amazon (AMZN) has seen more than a 20% drop in value on the NASDAQ.
Wall Street is becoming restless-- is it time for Amazon.com CEO Jeff Bezos to start focusing on the bottom line?
Yahoo Finance’s Henry Blodget believes that investors are clearly becoming frustrated. “I think what really spooked people was the big loss that they forecasted this quarter. It was startling even to me,” says Blodget who has been a long time Amazon shareholder.
The Amazon Fire Phone appears to have been a flop. The company cut prices to just $0.99 with a 2-year contract from $199.99, indicating that sales are slow. Amazon is embarking on other huge endeavors that could result in huge outcomes but, “it is very hard for any company to do five different huge things at once and do them that well,” says Blodget. Amazon lacks the cash that companies like Google and Facebook have which allow them to juggle multiple projects.
Still, Blodget doesn’t think 20% is that huge of a loss and notes, “if the stock moves sideways for three to five years as they develop these big opportunities that’s fine with them.” In 2011, Amazon took a 25% hit and was able to recover well.
It’s also possible that Alibaba (BABA) is putting a strain on Amazon’s stock…analysts predicted before the Chinese merchant’s IPO that investors would take money out of Amazon to allocate it to the newly public online retailer.
Usually, says Blodget, Amazon tanks on earnings and then gains once more coming into the next quarter. But CEO Jeff Bezos is most likely unfocused on the stock price and, “the reason Amazon has been such a homerun for the past 15-20 years is that they, unlike so many other companies, are able to tune out that quarterly market pressure."