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May 28, 2017

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Amazon posts lower 4th-quarter net income but stock jumps

NEW YORK--Amazon's fourth-quarter net income fell 45 percent, as sharply higher revenue failed to keep pace with increased spending on order fulfillment and digital content, a trend that's become the norm for the world's largest online retailer.

The company's financial results missed Wall Street's expectations — but investors sent the world's top online retailer's stock up more than 7 percent in after-hours trading.

"It boggles the mind," said BGC Financial analyst Colin Gillis, who attributed the stock price jump to slightly stronger-than-expected operating income. "A lot of people scratch their head at the valuation given to Amazon and the support the stock has."

The company says it has been investing a lot of its income into enhancing its distribution network and its Kindle business as part of a long-term growth plan.

Although profit margins have been thin, investors continue to be more than forgiving. Its stock price gained 45 percent in 2012. It has risen another 4 percent so far this year. Inc. said Tuesday that it earned US$97 million, or 21 cents per share, in the October-December period. That's down from US$177 million, or 38 cents per share, in the same period a year earlier.

Revenue for the crucial holiday quarter grew 22 percent to US$21.27 billion from US$17.43 billion.

Analysts had expected earnings of 28 cents per share on revenue of US$22.26 billion, according to a poll by FactSet.

"We're now seeing the transition we've been expecting," said Jeff Bezos, founder and CEO, in a statement. "After five years, eBooks is a multibillion dollar category for us and growing fast — up approximately 70 percent last year."

Amazon's operating income jumped 56 percent to US$405 million from US$260 million in the fourth quarter of 2011. That's much better than the company's guidance, which was for an operating loss of US$490 million to an operating income of US$310 million.

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