AMZN - Sector: Services---Industry: Retail -Catalog & Mail Order-

[stockpicker]

I shorted today @ $86.40

I cannot explain a P/E of 115 for an online retailer

Fundamentals always win for the long run!

[setravis]

Amazon revenue, spending surges; stock jumps

Wednesday July 27, 2011, 8:56 am EDT

SAN FRANCISCO (Reuters) - Amazon.com Inc will use its surging revenue to boost growth and drive expansion into areas such as Web content and cloud computing rather than boost its margins.

The largest Internet retailer reported a jump in quarterly revenue on sales of its Kindle electronic reader and other electronics and forecast better-than-expected revenue for the current quarter, sending its shares up more than 6 percent late on Tuesday.

Amazon benefited from growth in e-commerce, though margins continued to be pressured by heavy spending on distribution, technology and digital content.

The company is investing to build warehouses and distribution to support rapidly growing e-commerce, its main business.

It's also spending heavily on servers and data centers for its cloud computing business Amazon Web Services, while buying more digital content to bolster media offerings, such as streaming video.

This spending has dented profit margins in recent quarters. Analysts and investors are mostly happy to see such investment by the company -- as long as it winds down at some point and lays the foundation for future profit increases.

"They're sacrificing near-term profitability for longer-term revenue growth," said Michael Souers, specialty retail analyst at S&P Equity Research. "As long as they are able to transform growth into profits in the future, investors will be satisfied. The chances are strong."

Amazon on Tuesday reported a 51 percent rise in second-quarter revenue to $9.91 billion, surpassing Wall Street's expectations for $9.4 billion.

The company forecast third-quarter sales of $10.3 billion to $11.1 billion, compared with the average forecast for $10.35 billion, according to Thomson Reuters I/B/E/S.

Second-quarter net income fell to $191 million, or 41 cents per share, from $207 million, or 45 cents per share, in the same period a year earlier. Analysts expected 35 cents per share for the latest second quarter, according to Thomson Reuters I/B/E/S.

The operating profit margin fell to 2.0 percent from 4.1 percent a year earlier.

Operating income is expected to be between $20 million and $170 million in the third quarter, the company estimated. The guidance includes about $180 million of stock-based compensation expense and amortization of intangible assets. It also assumes no other acquisitions or investments will close in the quarter.

That forecast suggests Amazon's third-quarter pro-forma operating margin will be 1.8 percent to 3.2 percent, according to Aaron Kessler, an analyst at ThinkEquity. That's below his previous estimate.

"Amazon's willing to give up short-term profits for long-term growth and more market share," Kessler told Reuters. "But ultimately they are managing the business for shareholders. We're expecting modest margin expansion next year. Investors would like to see some return on these investments starting next year."

The company is expected to introduce a tablet computer later this year that would compete with Apple Inc's iPad.

Souers reckons thin third-quarter margins suggest Amazon is spending heavily on this new tablet.

"Longer term this is the best move they can make. The world is shifting toward digital from physical media and a tablet will help them cement a position in streaming content like movies and music," the analyst said.

Amazon Chief Financial Officer Tom Szkutak declined to comment on whether the company was working on a new tablet computer. However, he pledged to keep spending and investing to support growth and new businesses.

Amazon said it spent $941 million on so-called "fulfillment centers" -- warehouses or logistics centers -- in the second quarter, compared to $582 million a year earlier. Technology and content costs totaled $698 million in the latest period, versus $408 million in the same period of 2010.

"We're investing in the conversion from physical to digital and we feel very good about the traction we're getting there," he said.

Szkutak also stressed that the company is focused on cash flow and high returns on investment, rather than profit margins.

Amazon's main online retail business is growing so fast that the company needs to spend on a lot of new distribution capacity, he explained during a conference call with analysts.

Amazon has announced 15 new fulfillment centers so far in 2011 and the company will unveil more before the end of this year, he noted.

Amazon Web Services -- which hosts computing for corporate clients over the Internet -- accounts for a "big piece" of Amazon's current and future spending, because it's growing so fast, the CFO added.

Amazon shares, which have risen about 18 percent since the start of 2011, gained 6.1 percent to $227.35 in after-hours trade.

The company said sales in Worldwide Electronics and Other General Merchandise, which includes the Kindle e-reader, computers, cameras and other consumer electronics, jumped 69 percent to $5.89 billion in the second quarter.

Excluding currency fluctuations, sales rose 62 percent.

"That's very strong," said Scot Wingo, chief executive of ChannelAdvisor, a software provider that helps retailers sell more online through channels including Amazon and eBay Inc.

"E-commerce in general is growing at 10 percent to 14 percent, so Amazon continues to gobble up market share." Wingo owns Amazon shares, and eBay is an investor in ChannelAdvisor.

At some point, such growth will taper off and this is when Amazon will be able to cut back on spending and increase profitability, S&P's Souers said. He's expecting margins to increase "significantly" in coming years.

[setravis]

Amazon.com: A Deep Dive into the Company's Strong Quarter...

But from what I hear someone else say...
Who is Buying this Crap???
AMZN is a Tax dodger, community destroyer's not contribute a single dime to local police, local school district & does not care. AMZN is an organization does not care about any community except insider pockets eventually it will DEMISE.


Day's Range: 222.26 - 227.20
52wk Range: 114.51 - 227.20
Volume: 6,131,115
Avg Vol (3m): 4,997,720
Market Cap: 101.60B
P/E (ttm): 97.35
EPS (ttm): 2.31
Div & Yield: N/A (N/A)

Technicals
Record Price High
Most Actives
Gap Up
Percentage Gainer
Price Gainer

Last Price Quote is:
5.60%above 13-day EMA
10.93%above 50-day EMA
RS Rating: 8 

[setravis]

A Deep Dive into the Company's Strong Quarter

Wednesday July 27, 2011, 11:08 am

The technology sector as a whole has been ablaze in 2011′s second fiscal quarter, and is abound with examples of unprecedented corporate profits, such as Apple reporting its best quarter ever, and Google topping expectations hugely. Amazon was the latest major tech player to to jump aboard, reporting results Tuesday afternoon that didn't wow with Apple-like numbers, but still represented a strong showing for the eCommerce giant, coming in with an earnings mark $0.11 higher than analyst targets. Although net income was down, the company reported some very positive developments, such as rapid growth in overseas markets, "International segment sales, representing the Companys U.K., German, Japanese, French, Chinese and Italian sites, were $4.51 billion, up 51% from second quarter 2010." Music and video sales were also a bright spot, as its "Worldwide Media sales grew 27% to $3.66 billion."

The company also won through strong growth in Kindle sales, propelling it above expected revenue marks of $9.35 billion to $9.91 billion. Amazon may have sold 8 million Kindles in the past year, accounting for 5% of total sales not including the number of ebook orders placed through the eReader. eBook sales continue to show their promise as competitors such as Google jump into the game, while the Kindle retains a strong lead in market share over Barnes and Nobles' Nook. It has continued to be one of the company's highest growth areas at a time when Amazon is heavily concerned with reinvesting income to grow the business.

Don't Miss: Cloud Computing: Your Cheat Sheet to the Cloud Business Landscape.
Analysts Fred Moran of Benchmark commented on Amazon's earnings, "Spending continues at a fairly aggressive pace and the guidance for third-quarter operating income and earnings looked a bit below what we were expecting...It's not really a surprise to Wall Street because Amazon's management has been forthright that they would be reinvesting heavily in the business for an extended period of time."

Amazon remains well positioned to serve as a leader in an eCommerce revolution that is already underway. Over the past several years, shoppers have increasingly eschewed traditional retail and wholesale stores such as Target and Walmart , finding comparable deals and more choices while perusing outlets on the web. eCommerce transactions grew by 12.6% in 2010, representing a total US market of $176.2 billion, while that number is expected to broach $300 billion by 2015. JP Morgan analysts recently upped their expectations for eCommerce growth this year, predicting it would hit a clip of 19.6% worldwide, at a total market of $670 billion, which could easily reach $1 trillion by 2014.

Perhaps its position at the forefront of a brimming eCommerce market is the reason Amazon continues to so vigorously challenge new state laws that exact a tax on web-based sales. The company recently cut ties with over 10,000 affiliates in the state of California (to avoid the sales tax) as it challenges the constitutionality of the law in the court system. Even more evidence the company has really set its gaze forward, yesterday we reported that Amazon will launch its web stores in India next year.