After Apple, Yahoo, Facebook and Google, today we get Amazon and another 10% share price slide after hours. On the surface a 22% rise in full year sales to $74.5b and a 20% rise yoy in Q4, look impressive. But the ‘problem’ is that they only made $239m profits on sales of $25.6b in the last quarter. And that was far lower than expected.
If TechMarketView has had one message to companies since its creation, it is that at some point every company has to make a profit. Everyone (most crucially at the moment the SaaS and other pure play Cloud players) seems to think that as long as revenues grow your stock price will grow too and that’s all that matters. It is not. They then tell us “Don’t worry. When we stop investing in R&D and S&M, profits will be so huge they will eclipse anything you have ever seen before”.
Nobody doubts the power of Amazon. But now investors are increasingly saying, please show us how you can make profits? As we know ‘on the High Street’ retailers are struggling and Amazon is oft-cited as the #1 reason. But, although Amazon may steal the revenues, maybe, just maybe Amazon will be no more successful in generating profits than their bricks & mortar competitors.
And that is what investors are now waking up to. That is why Amazon shares sank last night.
Finally, just to say that I’ve been an ‘inactive’ Amazon shareholder for a long time. Despite the fall, Amazon is still up 60% since 1st Jan 13.