Eating the World?

Maybe Amazon won’t be eating the world.


Yesterday Amazon reported its third quarter results. And they weren’t pretty. In spite of growing revenues another 20% from a year ago, the company lost over $400 million the third quarter, up from a $40 million loss a year ago. Included in these numbers was a $170 million charge for their smartphone, which hasn’t been selling very well.

Investors weren’t happy. The shares fell more than 10% in after-hours trading, back to a level not seen since June of last year. For years, Amazon could do no wrong, with skyrocketing sales and new projects that fired the imagination. But so far this year investors have been more skeptical: shares are down over 20%.

Amazon feels like a throwback to the dot-com boom. Traditional valuation metrics don’t seem to matter; the stock trades at an eye-popping 800 times earnings. By contrast, Apple’s price is 17 times earnings, and IBM is at 10 times.

But the company isn’t just hopes and dreams: they employ almost 150 thousand people. Earlier this year I wrote how online shopping is transforming the $2 trillion retail industry. It’s just so convenient! But growth only goes so far. Investors have been pretty patient with Amazon, waiting for better profits. But they may not be willing to wait forever.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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