Amazon shares drop almost 10 percent with sales lower than analysts predicted

GlobalPost

Amazon, the world's largest internet retailer, saw its shares drop almost 10 percent on Tuesday after a slow fourth quarter, Bloomberg Businessweek reported

Amazon's stock dipped to $174.40 late Tuesday, after the Seattle-based company said its fourth-quarter revenue was $17.4 billion, trailing the $18.3 billion estimated by analysts in a Bloomberg survey. 

According to Wireless Week, Amazon does not predict an improvement in the coming quarter: the company expects net sales for the first quarter of 2012 to be between $12 billion and $13.4 billion, though analysts were expecting the higher end of that range.

“To miss on the top line, that’s what breaks the momentum,” said Colin Gillis, an analyst at BGC Partners LP in New York, who recommended selling Amazon stock.

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Despite a successful holiday season for its Kindle e-reader and tablet devices — sales were up 177 percent from last year — Amazon was challenged by price cutting from rivals. It also used more third-party sellers, which generate less revenue in direct sales, Bloomberg reported.  

"We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the US and Europe," said Amazon chief executive Jeff Bezos in a statement, according to AFP. "Our millions of third-party sellers had a tremendous holiday season with 65 percent unit growth and now represent 36 percent of total units sold," he added.

Some also argue that the drop in Amazon's stock has to do with Amazon's focus on long-term investments, not the company's overall value.

"Rather than focusing on short-term quarterly results and Wall Street projections, Seattle-based Amazon is more concerned with investing in products that will pay off five to ten years down the line," wrote digital financial media company The Street. "Analysts still remain largely bullish on the stock's long term prospects, despite skepticism from spooked investors who rushed to sell shares following the company's earnings." 

They said Amazon's plummeting shares were "no big deal" for the company. 

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Amazon shares have traded in a range of $160.59 to $246.71 over the past year, and closed Tuesday's regular trading session at $194.44, up $2.29 or 1.19 percent, according to NASDAQ News. The stock is currently losing $15.20, or 7.82 percent, in after-hours trading.

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