Amazon share price: Q4 sales forecast disappoints

on Oct 24, 2014
Updated: Oct 21, 2019
Listen, Friday, October 24: The price of Amazon Inc (NASDAQ:AMZN) stock plunged more than 10 percent in yesterday’s after-hours trading in New York, after the world’s leading e-commerce company reported its financial results for the third quarter ended September 30.

Amazon posted a huge net loss in the quarter, attributed to its relentless drive to invest in new products and infrastructure. As well, the tech giant’s fourth quarter sales forecast missed market expectations, further disappointing investors.
In today’s trading, Amazon shares were down 6.4 percent intraday at $292.99, shortly after the opening bell in New York. The company’s stock has fallen 27 percent since the start of the year.

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**Disappointing results, forecast**
Amazon’s third quarter revenue increased 20 percent to $20.58 billion, missing analyst forecasts for $20.84 billion. Much bigger however, was the company’s miss in terms of earnings, with the online retailer posting a net loss of $437 million, or 95 cents a share, versus market expectations for a loss of 74 cents per share. The shortfall dwarfed last year’s $41 million, or nine cents a share.

Compounding the dismal news was the sales projection for the fourth quarter of the year, with Amazon revealing that it expects net sales of between $27.3 billion and $30.3 billion for the key holiday quarter, well below the average of $30.89-billion estimated by analysts polled by Thomson Reuters.
Amazon’s knack of delivering annual sales growth of 20 percent or more had convinced investors to overlook its persistent lack of profit in the past. The e-marketeer has become notorious on Wall Street for its strategy of heavy investment in new products, services and improvements to its core business, in order to drive growth. And according to the company’s Q4 forecast, sales will indeed grow in the final three months of the year, at between seven and 18 percent.

Reuters quoted Rob Plaza, senior analyst at Key Private Bank, as observing: “That kind of takes the top-line growth story off the table. And now they’ve got to deliver on profit margins.”
Plaza added: “Because of all that money they need to spend to drive growth, it becomes an expensive proposition.”

Amazon also expects to see losses as deep as $570 million in the fourth quarter.
**Analysts on Amazon**
According to the Financial Times, the 36 analysts offering 12 month price targets for Amazon have a median target of $392.50, with a high estimate of $460.00 and a low of $330.00. As of 17 October, the consensus forecast amongst 58 polled investment analysts covering Amazon has it that the company will outperform the market. This consensus estimate has been maintained since the sentiment of investment analysts improved on 19 October 2009, the FT notes.
**As of 15:09 BST, buy Amazon shares at $291.79**
**As of 15:09 BST, sell Amazon shares at $291.53**


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