Amazon first-quarter sales forecast misses estimates, shares down

Amazon chief executive Jeff Bezos

The company said that for the first quarter of 2019, net sales are expected to fall between US$56 billion and US$60 billion - though some analysts had set their sights on almost $61 billion. Those profits also help fuel Amazon's growing devices business, which includes smart-home and connected-car gadgets that operate on Amazon's voice-activated Alexa platform. On average, analysts had expected revenue of $71.88 billion. A lucrative cloud computing business, as well as fees that merchants pay Amazon to ship and advertise their products, has fattened the company's once-thin profit margin.

After an initial spike, Amazon stock fell after-hours from a close of $1,718.73 to $1,625 at publication time on weaker guidance for the next quarter than investors had hoped for.

Yet investors focused their attention on Amazon's global operation, where the company has long lost money in the hopes of future profit. Although its operating loss shrunk to US$642-million from US$919-million in the quarter, rules in India created concern. Amazon makes money now by allowing companies to pay for preferred placement for their products in search results on its website.

"We are getting more and more creative around getting efficiency up and getting our cost of acquisition down", Amazon's chief financial officer, Brian Olsavsky, told analysts on the company's quarterly earnings call on Thursday.

The company began removing a wide array of products from its India website late on Thursday to comply with the new foreign investment curbs that kick in on February 1, Reuters reported.

"At some point, they're going to have to look for more sales opportunities outside of traditional retail, otherwise the law of large numbers is going to have a greater impact on future sales growth", said Tom Forte, managing director and senior research analyst at D.A. Davidson. "Not a bad report, but there are enough questions where (the) stock will likely be under pressure".

Amazon's net income rose to $3.03 billion, or $6.04 per share, in the quarter ended December 31 from $1.86 billion, or $3.75 per share, a year earlier, which included a tax gain.

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Also, Amazon's purchase of slower-growing Whole Foods is expected to weigh down its robust growth rate. For example, Olsavsky said, the company launched Free Dive, an ad-supported streaming video channel attached to its internet Movie Database (IMDb) site in January. The company had little need to splurge in 2018 thanks to prior spending on warehouses, headcount and other areas, boosting profit.

"If they are stepping on the accelerator, that means they like what they're seeing, and it's worthy of more investment", he said.

Amazon.com delivered revenues of $72.4 billion, capping off a year in which it reported total revenues of $232.9 billion.

Amazon Web Services - Amazon's cloud hosting platform that powers a significant chunk of the public internet - generated $7.430 billion Dollars (roughly $9.75 billion CAD) in Q4 2018. Sales at the division rose to $7.43 billion from $5.11 billion a year ago, topping analysts' estimates.

But besides revenue, profit is also a huge deal, and AWS nailed it there, as well. The company said a record number of customers signed up for its "Prime" subscription service in 2018, including "tens of millions" of consumers during the holiday shopping season.

FILE PHOTO: The logo of Amazon is pictured inside the company's office in Bengaluru, India, April 20, 2018. With Amazon controlling 50 percent of e-commerce purchases in the United States, more sellers have an incentive to fork over money for these ads.

AWS sales increased 45 percent in the quarter to $7.4 billion and generated almost $2.2 billion in operating income.

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