Amazon shares take a beating

[SaP]

The e-commerce giant's spending spree appears to be annoying investors, after the firm posted a wider-than-expected quarterly loss.

Amazon CEO Jeff Bezos at the Fire Phone launch in June.James Martin/CNET

Investors could finally be losing their patience with Amazon.

Amazon's stock tumbled 12 percent in early trading on Friday to about $315 a share. As of Thursday's close, the stock was already down 10 percent so far this year.

The online retailer has enjoyed an incredible run-up in its stock for years, even as the company has spent heavily to fuel its rapid growth, eschewing profits along the way.

In past quarters, investors cheered strong revenue growth despite tiny profits or even losses. However, the company's stock now is experiencing a selloff after Amazon on Thursday came out with a wider-than-expected second-quarter loss of $126 million. An even bigger operating loss, as much as $810 million, is predicted for the current quarter.

To quickly grow, Amazon has taken the money it may have booked as profits and instead spent it on more warehouses, employees, and technology, while also undercutting prices of some competitors. Common investor wisdom has stated for years that Amazon's high-spending, low-pricing model could force competitors out of the company's market, allowing Amazon to eventually raise prices, cut back on spending, and start posting strong profits. That scenario hasn't happened.

Instead, Amazon is still driving up its spending, adding to its hardware line with the new Fire Phone and investing in original content for its streaming-video service in an effort to rival Netflix.

Amazon could also end up facing increased competition from Chinese e-commerce juggernaut Alibaba, which is planning one of the biggest initial public offerings in US history this year and is expected to push into the US market.

Overall, Amazon on Thursday posted a quarterly loss of $126 million, or 27 cents a share, compared with a year-earlier loss of $7 million, while revenue jumped 23 percent to $19.34 billion. Analysts on average expected the Seattle-based e-commerce giant to report a loss of 15 cents a share with $19.34 billion in revenue.

The company is certainly doing a lot of things as it tries to gain an edge on other online retailers such as eBay and brick-and-mortar players like Wal-Mart and Target. It seems like the one things it's not doing is pleasing its investors.

http://www.cnet.com/news/amazon-shares-take-a-beating/

[Matrixreformed]

thanks for the info