Amazon’s Q4 financials: stock drops 3% on disappointment (but sales up 22%)

Amazon’s Q4 financials: stock drops 3% on disappointment (but sales up 22%)

Amazon just announced their fourth quarter financials. As usual, they did a public webcast:

They also did a

Press Release

which covers a lot of the numbers.

The reaction in the media, and by investors, was negative…the stock dropped about 3% in a day, as you can see in this

CNN Money graph

That’s not an atypical reaction to an Amazon financials announcement…negative stories, (temporary) stock drop.

I’m sometimes baffled by that. In this case, net sales went up 22%…something you might expect in a new and rising entry into a market, not the dominant force.

However, in this case, I can see the concern.

Let me say right off: that’s not a long term concern of mine. Amazon’s in no trouble, and I expect we’ll see continued sales growth this year.

It’s more that Amazon didn’t meet expectations…which weren’t, I would say, unreasonable.

I also thought this was a great point in this

recode post by Jason Del Rey

Del Rey confirmed with Amazon that there had been tens of millions of new

Amazon Prime (at AmazonSmile: benefit a non-profit of your choice by shopping*)

members, which is a good thing.

However, Del Rey also sagely notes…Amazon didn’t talk about the rate of Prime member growth.

That is a big deal.

These sorts of calls and releases are carefully crafted, and it’s reasonable to say that leaving out a citation of the growth (which they have made in the past) is deliberate…and therefore, it wasn’t something to tout.

While Amazon is only partially a retail company now (things like AWS, Amazon Web Service, are really significant segments), Prime is key.

As a Prime member myself, this actually encourages me…it means Amazon may work harder to make Prime attractive (and they already do a lot: for one thing, they added Prime Reading (at AmazonSmile: benefit a non-profit of your choice by shopping*) which is a rotating group of something like a thousand books Prime members can read at no additional cost).

I do, though, find Amazon’s expenditures, while they hurt the bottom line this time, reasonable. A starring character in the information was Alexa (Amazon’s digital assistant), and Amazon is definitely spending on that.

That’s very forward looking, and may make a giant difference going forward.

I’ve said before that Amazon wants to be the “infrastructure of the internet”, and this is part of that. If Alexa is the way you get to, well, everything, Amazon can charge the providers of those goods and services (not the customer) for access to you. That’s why I say that Amazon’s most important product is happy customers…that’s what they can “sell” to other businesses. That’s not by selling your information, it’s by selling that access, which you may specifically want. If you download an app for a company, you’ve chosen to give that access.

Complaining about Amazon spending on Alexa would be like investors saying, “Mr. Ford, we don’t like the amount of money you are spending on this assembly line thing.” 😉 The development of that clearly had an expense, but it would have been shortsighted, to say the least.

I expect Amazon to reveal a big Virtual/Augmented Reality initiative this year, and that’s going to cost. Amazon is spending on video content, both licensing it and developing their own. Those are being critically recognized: Amazon is the first streaming service with a Best Picture nominee (Manchester by the Sea), and the TV side does well also (I’ll be surprised if Christina Ricci isn’t nominated for Z: The Beginning of Everything, playing Zelda Fitzgerald…where author F. Scott Fitzgerald is also a major character). They are hiring something like 100,000 people, and opening brick-and-mortar stores.

I don’t think we’ll ever get to a point where Amazon is just coasting on previous successes…and we don’t want that. 🙂 Being an Amazon investor is never going to be a feel good experience; being an Amazon customer is. 😉

Have a reaction to the news, or predictions for Amazon in the future? Want to give Jeff Bezos advice? Feel free to let me and my readers know by commenting on this post.

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* I am linking to the same thing at the regular Amazon site, and at AmazonSmile. When you shop at AmazonSmile, half a percent of your purchase price on eligible items goes to a non-profit you choose. It will feel just like shopping at Amazon: you’ll be using your same account. The one thing for you that is different is that you pick a non-profit the first time you go (which you can change whenever you want)…and the good feeling you’ll get. :) Shop ’til you help! :) 

This post by Bufo Calvin originally appeared in the I Love My Kindle blog. To support this or other blogs/organizations, buy  Amazon Gift Cards from a link on the site, then use those to buy your items. There will be no cost to you, and a benefit to them.

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