Amazon Shares Plunge After Earnings Miss Wide Of Mark
It was supposed to be a statement quarter for Amazon.com AMZN -8.61% and its CEO Jeff Bezos. Coming off a stunning year, where it surprised investors with actual profits and, as a result, saw its shares hit all-time highs, the online retailer’s holiday quarter, was to be the bow that tied 2015 together.
Instead, the company’s fourth quarter earnings fell far of analyst expectations on Thursday, sending Amazon shares tumbling after-hours. Shares dropped more than 10% from the company’s closing share price on Thursday of $635.35.
For the three months ending on Dec. 31, net income was $482 million, or $1.00 per share, compared to a profit of $214 million, or 45 cents a share, in the same period last year. A group of 37 analysts polled by Yahoo expected an average profit of $1.56 a share for the final quarter of 2015.
Net sales, which also missed forecasts, were $35.75 billion, up 21.9% from $29.32 billion in the fourth quarter of 2014. That was about $200 million shy of analysts’ forecasts of $35.93 billion, and within Amazon’s own previously projected range of $33.5 billion to $36.75 billion.
Prior to Thursday’s report, Amazon had recorded a meteoric 2015. While investors and analysts had hammered the company in the past for its lack of profits, the online retailer’s deep investments into warehouse infrastructure, last-mile delivery and membership program, Amazon Prime seemed to be paying off. The company recorded surprise profits in its second and third quarters and shares, were up nearly 80% over the last 12 months.
Bezos was the biggest benefactor of that jump, going from the 15th richest person in the world as of FORBES’ calculation of the globe’s wealthiest people in March to as high as fourth as of Wednesday.
Some of Amazon’s growth could be attributed to the company’s cloud computing unit, Amazon Web Services. For the company’s fourth quarter, net sales for the segment were $2.41 billion, up from $1.42 billion in the same period for 2014. Operating income was $687 million, almost tripling from the last three months of 2014. Amazon CFO Brian Olsavsky also noted that at the end of the quarter, AWS was at a $10 billion run rate and had more than 1 million active customers.
As usual, Amazon’s earnings release divulged some figures surrounding the growth of their business units, but didn’t reveal the whole picture. The company said that international Prime memberships grew 51% in 2015–slightly slower than the 53% increase it saw in 2014–though it did not say how many total members it had. A report from Consumer Intelligence Research Partners earlier this week estimated that were now 54 million Prime members in the United States, though Amazon has never confirmed figures for its membership program.
Also remotely interesting is the fact that Fulfillment by Amazon, the company’s program by which it stores and ships third-party sellers’ merchandise, shipped more than 1 billion units in 2015, while active sellers using the service grew by 50%. That was slower than the 65% that FBA grew in 2014, and again, Amazon did not disclose the number of merchants using the service.
Amazon ended 2015 with net sales of $107 billion, an increase of 20% from 2014 and the first time ever the company has had a $100 billion year. The increase would have been an even greater at 26% after adjusting for the negative effects of fluctuating foreign exchange rates. Net income for the year was $596 million, or $1.25 per diluted share, compared to a loss of $241 million, or 52 cents a diluted share, in 2014.
The company said it expects net sales for the first quarter of 2016 to be between $26.5 billion and $29 billion, representing growth of 17% to 28% compared to the same period last year. It also said operating income is expected to be between $100 million and $700 million, compared to the $255 million it recorded in the first quarter of 2015.