Amazon.com, Inc. [gm q=AMZN m=NASDAQ c=Amazon] shares dropped 13 percent in after-hours trading yesterday as the firm fell short of Wall Street’s expectations for the holiday fourth quarter.
Amazon’s Q4 2015 earnings of $482m and $1 a share were more than twice that of Q4 2014. However, the figures are a far cry from the $1.56 per share analysts surveyed by Thomson Reuters were expecting.
Meanwhile, a 22 percent jump in sales to $35.7bn didn’t quite reach analysts’ forecasts of $36bn.
To see things in perspective, however, this past quarter was Amazon’s best ever for sales, and its net income beat its figures for the last 17 quarters combined.
This comes at a time when other retailers are suffering. eBay (NASDAQ:EBAY) recently dashed expectations, while Walmart and Macy’s are closing stores.
Some analysts suggest that Wall Street is overreacting and that the expectations had simply gotten out of hand.
RBC Capital Markets Analyst Mark Mahaney summed it up to the New York Times: “This was more of an expectations correction than a fundamentals correction. There’s nothing in the numbers that would mark a dramatic change in Amazon’s growth or profit profile.”
“The last three quarters the company generated bottom-line results that were materially above Street expectations. That set up expectations we would see more of the same. We didn’t.”
Amazon, Inc.’s AWS still driving huge profits
AWS, the firm’s cloud computing division, saw sales jump 69 percent to reach $2.4bn while profit rose twofold to reach $687m, which is in line with what analysts expected.
AWS is a huge profit driver for the firm, nearly matching its entire e-commerce division in North America. The Verge reports that AWS margins rose from 17 percent in Q1 2015 to 29 percent in Q4 2015.
Amazon stock was one of the best performers last year. Shares more than doubled in value and the firm’s market cap went past $300bn. This year, however, it has lost 6 percent already.
Is Amazon Prime helping or hurting?
One place Amazon took a hit was in fulfillment. Its operating expenses for storage and delivery this quarter were $4.5bn. This is partly due to the rise in Prime memberships, which bring in more sales but cost the firm in terms of free two-day delivery.
Paid Prime memberships rose 47 percent in the US and 51 percent around the world.
Amazon CEO Jeff Bezos is shrugging off concerns. In a statement, he said:
“Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100 billion in annual sales and serve 300 million customers. And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like day one.”
Amazon’s sales forecast for Q1 2016 is $26.5bn to $29bn, which is a growth of 17 to 28 percent over Q1 2015.