Tech Check

Amazon's Operating Income is Glitch in Earnings


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

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 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?