Amazon Hits Earnings Record, But Stock Tanks

Amazon set a quarterly earnings record of $1 a share on $35.7 billion in sales last quarter, but traders sent the stock plunging over 7% Friday after the e-commerce company missed Wall Street’s earnings estimates by 36 percent.

The stock recovered slightly by the close of trading on Friday.

Amazon had zoen the hottest major tech stock for the last year, with a gain of 98 percent through the close of trading on January 28. Optimism for the company’s prospects were sky-high, with over 80 percent of analysts rating Amazon a “Buy” and no analysts rating the company a “Sell,” according to the NASDAQ web site.

Fourth quarter net sales for the Internet retailer came in about where the bullish analysts had predicted for the 2015 holiday selling-season, up 22 percent versus the same quarter in 2014 to $35.7 billion.

But management said the company was slammed by a “$1.2 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter,” according to the Amazon earnings conference call. As a result, Amazon badly missed the average profit estimate for 32 analysts of $1.56 for the quarter.

By any measure other than profitability, Amazon’s performance was outstanding. The company’s high-growth Amazon Web Services subsidiary, which specializes in “cloud computing” saw revenue spike to $2.4 billion, up 69 percent from the prior year and slightly ahead of analysts’ expectations. Year-over-year operating income for the wildly profitable AWS unit almost tripled, from $240 million to $687 million.

Amazon Prime paid memberships, which offer customers free shipping, an expanded catalog options, and streaming video, exceeded analysts’ expectations with a ripping 51 percent gain for the year. The company also reported in December that sales of the company’s Echo device, Fire tablets and Fire TV devices tripled in the fourth quarter.

There was no weakness in North American sales, which came in slightly above analysts’ estimates at $21.5 billion, up 24 percent over the final quarter of 2014. But despite a huge and expensive push, international sales only rose by 13 percent to $11.8 billion.

Germany, Japan, and the United Kingdom had accounted for more almost 85 percent of 2014 international sales. But last year, Amazon told Fortune magazine the company was fully committed to make India its biggest market after the U.S. within a decade.

Diego Piacentini, Amazon’s senior vice president for international retail, who oversees operations in Asia and Europe, and who is Amazon’s biggest employee shareholder after CEO Jeff Bezos, crowed to the magazine, “The size of opportunity is so large it will be measured in trillions, not billions–trillions of dollars, that is, not rupees.”

Amazon does not break out individual country sales, but the U.S. dollar was strong against all major currencies last year. Indian rupee currency fell by 9.6 percent against the U.S. dollar last year, despite a 7.5 percent growth of the Indian national economy.

Bezos is said to have lost $4 billion in personal wealth on Friday alone.


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