Today was a rough day for Internet retailers and service providers. First, Netflix (NASDAQ: NFLX) made headlines with an 8.8 percent drop for the day and now online mega-retailer Amazon (NASDAQ:AMZN) appears to be next in line. Shares of the company fell 1.68 percent in after hours trading following a report revealing second quarter operating income significantly below analyst estimates. Directly following the announcement shares dipped 3 percent before paring some losses.
The bottom line weakness is not out of left field though as operating costs, including technological improvements and expanding its distribution network have all cost the company money. Investors, as evidenced by the minimal impact of the announcement, appear to be willing to give Amazon a break as they continue to expand their business. Still Amazon’s earnings have been falling in recent months and the decline is significant. The company should hope its expansionary efforts will help bring in more revenue or investors may lose their patience. For the first quarter that ended in March, Amazon reported earnings of $201 million, or 44 cents a share. During the same period last year, Amazon brought in $299 million or 66 cents a share.
Analysts has been expecting reports more in line with last year, predicting earnings of 61 cents a share on revenue of $9.54 billion. The earnings report continued to disappoint when Amazon revealed on operating income of $322 million, which translated to an operating margin of 3.3%. Wall Street had been anticipating an operating margin of 3.8%.
Fulfillment costs were 57 percent higher for the quarter. Technology and content costs surged 58 percent r while marketing costs increased sharply, up 63% to $327 million. Because of the added efforts some equity experts are predicting increased success by the end of the current quarter or in the second half of the year.
Amazon appears optimistic, predicting second-quarter revenue between $8.85 billion and $9.65 billion, against analyst expectations of $8.75 billion.
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