Amazon shares plunge as record profit still misses estimates

Amazon.com Inc posted its most profitable quarter ever on Thursday but the world's No. 1 online retailer still managed to disappoint Wall Street by badly missing estimates, sending its shares down more than 13 percent in after-hours trading.

The results, as well as the company's determination to invest more in new areas and its extremely low profit margins, brought back perennial questions for investors about the company's ability to consistently earn money.

"By comparative retail standards, Amazon's level of profitability is still painfully weak," said Neil Saunders, head of retail analyst firm Conlumino, who is still positive on Amazon's prospects. "For every dollar the company takes, it makes just 0.75 of a cent in profit."

Amazon's net profit for the fourth quarter, which includes the holiday shopping season, rose to $482 million, or $1.00 per share, in the quarter ended Dec. 31, up from $214 million, or 45 cents per share, a year earlier.

That figure was held back by rising operating costs. It was well below analysts' average forecast of $1.56 per share, according to Thomson Reuters I/B/E/S.

The company's shares plunged 13 percent to $551.50 after hours on Thursday, following a 9 percent increase in regular trading. They are still up 80 percent over the past 12 months.

Amazon notched its third consecutive profitable quarter for the first time since 2012, but it still left Wall Street wanting more.
 
"The growth story that investors were looking for... clearly Amazon has not been able to live up to the hype," said Adam Sarhan, chief executive of Sarhan Capital.

Net sales rose 21.8 percent to $35.75 billion, but missed analysts' expectations of $35.93 billion.

Excluding a $1.2 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 26 percent compared with the fourth quarter of 2014.

Amazon Chief Financial Officer Brian Olsavsky defended the company's results on Thursday, adding that foreign exchange rates had an unexpectedly large impact, but overall the company had "a very strong quarter and a strong year."

Net sales from its cloud services business, Amazon Web Services, rose 69.4 percent to $2.41 billion, compared with a growth of more than 78 percent in the third quarter. AWS continues to be the fastest growing division within Amazon.

The company's total operating expenses rose more than 20 percent to $34.64 billion in the fourth quarter.