Amazon Stock Slumps As Q3 Earnings Decline Sharply

October 27 00:00 2011

New York, October 26 ( – No sooner had Inc (NASDAQ: AMZN) reported Tuesday that operative income for the third quarter had fallen 71 percent from 2010, its high-flying stock tumbled $25 in after-hours trading. This was in addition to the loss of $10 before the earnings report was announced with the result that its market cap shrunk by $16 billion in one day.

Adding fuel to fire, Amazon shocked investors further with a far weaker-than-expected outlook for the crucial holiday season quarter. It has spent heavily on its new Kindle Fire tablet computer and despite the overwhelming response that it has received prompting an increase its production, Amazon said it might lose as much as $200 million in the fourth quarter.

Amazon has forecast fourth-quarter revenue of $16.34 billion to $18.65 billion, compared with analysts’ average estimate of $18.15 billion which indicates that there would be 27 to 44 percent growth from a year earlier. In the third quarter there was a sales growth of 44 percent which was less than the second quarter growth of 51 percent.

The forecast of a loss of $200 million in the fourth quarter was “materially below” Wall Street expectations of $374 million in operating profit. Evercore Partners analyst Ken Sena said, “We’re not seeing the investment pay off yet, but I think investors are impatient as to how long will it take before you will start to see this pay off. When are we going to start to see some signs?”