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Despite record profits, Amazon shares sink on disappointing sales

Despite record profits, Amazon shares sink on disappointing sales
[Photo: Christian Wiediger/Unsplash]

The online retail giant has been a hot stock this year. The stock has gained 49% in value this year, trailing only Netflix. But it had some mildly disappointing news for Wall Street today.

  • Analysts had expected third-quarter revenues of $57.1 billion in revenue, but Amazon reported $56.6 billion—which is still up 29% from last year.
  • Analysts have been watching the company’s AWS cloud services business, and Amazon met, but did not beat Wall Street estimates, reporting revenues of $6.7 billion.
  • Fundamentals seem strong. Amazon reported net income 10 times higher than the same period a year ago, at $2.8 billion, again topping $1 billion for the fourth straight quarter. Operating income was $3.7 billion; analysts had expected only $2.1 billion. The growth is likely coming from Amazon’s cloud business, its burgeoning advertising business, and its third-party sellers marketplace.

In a prepared statement, CEO Jeff Bezos also pointed to the growth of Amazon Business, its marketplace for business customers. “Amazon Business has now reached a $10 billion annual sales run rate and is serving millions of private and public-sector organizations in eight countries,” Bezos said in a statement.

  • Amazon provided a fourth-quarter revenue guidance that was also slightly below analysts’ expectations. The Street wanted to hear $73.79 billion, but Amazon forecast between $66.5 billion and $72.5 billion.
  • The stock rose over 7% today, but lost 8.8% of its value on news of the earnings numbers as of press time after market close Thursday afternoon.

The quarterly report comes as tech stocks have faced an ugly October. But overall, Amazon stock is still up more than 49% this year.

The company briefly hit a valuation of $1 trillion earlier this year, but the valuation has backed off that high by 15%. Jeff Bezos remains the richest man on the planet.

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