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 9 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, its shopping website and its Kindle business as part of a long-term growth plan. It opened 20 order fulfillment centers in 2012, bringing the total to 89 worldwide.
Amazon’s profit margins have been thin because of heavy investments – and the deep discounts the company offers consumers. Even so, 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.<p>Amazon.com Inc. said Tuesday that it earned $97 million, or 21 cents per share, in the October-December period. That’s down from $177 million, or 38 cents per share, in the same period a year earlier.
Revenue for the crucial holiday quarter grew 22 percent to $21.27 billion from $17.43 billion.
Analysts had expected earnings of 28 cents per share on revenue of $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.”
In contrast, he added, sales of paper books saw the lowest December growth rate in the company’s 17 years as a book seller – up just 5 percent.
Though revenue fell short of expectations, Cantor Fitzgerald analyst Youssef Squali said Amazon’s profit margin was much better than expected at 24.1 percent compared with 20.7 percent a year earlier. This could signal that Amazon is starting to reap some benefits from its investments.
Amazon’s operating income jumped 56 percent to $405 million from $260 million in the fourth quarter of 2011. That’s much better than the company’s guidance, which was for an operating loss of $490 million to an operating income of $310 million.
Seattle-based Amazon’s shares rose $24, or 9.2 percent, to $284.35 in after-hours trading. The stock had closed down $15.69, or 5.7 percent, at $260.35.