Amazon's Operating Income is Glitch in Earnings

Thursday, 22 Apr 2010 | 4:35 PM ET

You had to expect some kind of pullback with Amazon shares when the company announced its first quarter earnings, unless of course there was some kind of major blow-out.

Amazon Earnings
Amazon Earnings

After all, Amazon closed at an all-time high just moments before those numbers were released.

So it came as little surprise that the company, beating the Street by a nickel a share, still managed to nosedive in after-market trading. The company reported 66 cents a share on $7.13 billion.

That revenue number beat by over $200 million Wall Street expectations. But operating income might be the glitch in Amazon's earnings: The company reported $394 million there, which was over $70 million below what analysts anticipated.

The company says North American revenue jumped 47 percent year over year to $3.78 billion. That's a big number. Mark Mahaney at Citigroup anticipated something on the order of 35 percent growth to a figure closer to $3.5 billion. Amazon's International revenue was in line with Mahaney's expectations, up 45 percent to $3.35 billion.

Looking ahead to Amazon's current quarter: The company anticipates a revenue range of $6.1 billion to $6.7 billion, slightly below the mid-range of Wall Street consensus at $6.412 billion.

The company's operating income forecast is also lighter than the $461 million expected, with Amazon offering a range of between $220 million and $320 million. Amazon says its second quarter results will be affected by the Toysrus.com LLC $51 million settlement, substantially all of which was expensed during the quarter.

It comes down to guidance for Amazon. With a stock now at an all-time high (which is saying something when you consider what a key player Amazon was during the bubble years) to say Amazon is priced for perfection is an understatement.

Somehow, I get the feeling however, that just like in quarter's past, these shares will start making back today's snap losses in fairly short order. This was a good report, the sell-off is moderate, and the company's growth is still strong. That multiple is still pretty high, and I don't see that changing much, even with a report like tonight's.

Questions? Comments? TechCheck@cnbc.com

  Price   Change %Change