Amazon missed sales targets in the third quarter and posted a loss of $437 million. Analysts had hoped the company would turn a profit, especially given the time of year.
Amazon expects sales between $27.3 billion and $30.3 billion for the fourth quarter, reported Forbes. This is a wide range which reflects the company’s uncertainty concerning the business. Black Friday and Cyber Monday are approaching, but it is unclear just how high consumer demand will be.
Expansion has an effect on bottom line
Third quarter losses were attributable to the cost of new types of products and services that Amazon has invested in. While investors know that it takes time before new business lines can become profitable, many on Wall Street are nervous about the future of the giant retail company. On Thursday in hours after trading Amazon’s stock price fell by 11 percent to $278.88, reported CNet. Apparently, investor confidence was shaken by the net-loss announcement.
Amazon recently bought live-streaming site Twitch for approximately $1 billion. The company also planned to spend $100 million on original video content and will feature a new lineup of video games on its site. On top of that, the company recently introduced new versions of its Kindle e-reader and Fire tablet. With all these ongoing projects, during a time when industry analysts are looking to the company for signs of continued promise, the leadership of chief executive Jeff Bezos is being questioned by some. Chief financial officer Tom Szkutak spoke to analysts at Morgan Stanley but did not sound concerned, reported Businessweek.
“We try to learn from everything we do, as we launch new opportunities…The way I would describe it, from a looking forward standpoint, [is that] we still think we have a lot of opportunities. That said, we need to be very selective about what opportunities we pursue. That’s the way we are thinking about it,” said Szkutak, according to the news source.
Despite the recent bad news Amazon still has a successful business model that continues to attract new business because of fast shipping times and lowest product prices. It is important to note that while net income numbers were done, revenue increased by 20 percent from the third quarter to $20.58, reported Forbes. It is possible that Amazon’s negative net income numbers are simply a reflection of recent expansion, which will temporarily affect investor confidence, but core fundamentals remain strong.
Fundamentals still strong
Amazon should demonstrate in the next quarter however that it is still on top of its game. The company had a record season in 2013, with more than 36.7 million items ordered on Cyber Monday according to CNet. This year the e-commerce titan needs to show Wall Street that it is still the industry leader in online retail.
It was recently reported by The Wall Street Journal that Amazon will open stores in New York and California. The company intends to have physical store locations to feature its smartphones and tablets and also provide customers with same-day delivery. Amazon has many balls in the air this year. It remains to be seen what these new developments will mean for the company and if this holiday shopping season will be another record-setting experience for the company.Back To Blog