Jeff Bezos is testing the patience of investors after Amazon. com missed analysts' estimates for a second straight quarter, sending shares tumbling 10 per cent.
The world’s largest online retailer yesterday reported a second-quarter loss of $126 million, more than double what was predicted, even as sales climbed 23 per cent to $19.3 billion.
Expenses jumped 24 per cent to $19.4 billion.
Amazon remains one of the most highly valued companies in the US, yet the business is losing some of its sheen as profits are dragged down by investments that Bezos, the co- founder and chief executive officer, is making in cloud computing, warehouses and gadgets such as the new Fire smartphone.
While shareholders have been patient, they’re increasingly seeking signs that the long-term strategy will work.
“All of us understand making investments, and then there’s a point where investors don’t know what the payoff is,” said Michael Pachter, an analyst at Wedbush Securities in Los Angeles, who predicted that Amazon would report a quarterly loss.
“What if they get to $200 billion in revenue and still don’t have profit?”
For years, shareholders have backed Bezos’s view that big investments are necessary to gain share because Amazon’s business opportunity is enormous and will pay off in the long run.
In the process, the company has upended industries from bookstores and traditional retail outlets, to providers of Web-computing software.
Investors have rewarded with the highest valuation in the Standard and Poor’s 500 Index, currently trading at 569 times earnings.
After climbing 59 per cent in 2013, the shares of Seattle-based Amazon have declined 10 per cent this year, underscoring investors’ trepidation about mounting expenses.
The stock declined 10 per cent in extended trading following yesterday’s results, from $358.61 at the close in New York.
As Bezos has funneled more money to expanding distribution, grocery delivery services and smartphones and tablets, there’s little sign sizable profits are coming and Amazon issued a forecast yesterday for a wider loss in the third quarter.
Weighing on results is a price war in the cloud-computing market, where Amazon rents data storage and computing power to other companies.
Amazon, whose cloud competitors include Google and Microsoft, cut prices for its Amazon Web Services unit this year.
While Amazon doesn’t disclose specific sales for Web services, it’s part of the “other” category under North American sales in its financial statements, where revenue in the second quarter declined by 3 per cent to $1.17 billion from the prior period.
Bloomberg
