Amazon (Nasdaq:AMZN) issued numbers and some investors claim to be disappointed. Revenues are up huge but margins are down. Spending on infrastructure was huge and guess what the Kindle Fire is being sold at near break even prices. That’s break even folks not huge losses.
Normally I criticize management. But this time I’m going for a double and will criticize management and investors. Amazon is notorious for not sharing information. They play it close to the vest and keep investors in the dark. This heightens volatility. Today the stock sold of because of bad news. management could have been more forthright and prepped market expectations.
Investors on the other hand are bailing because of a poor quarter. what went wrong. Revenues are up huge. Top line gets a big check market. Margins have squeezed. The finger points to the Kindle Fire being sold in record numbers. Each Kindle Fire represents a cash flow stream. So if you get a lot of cash flow streams started that’s not so bad. As a matter of fact that is excellent.
Amazon has been viewed as a tech stock, a growth stock and a disruptor. Somewhere along the way investors were expecting earnings growth to be uninterruptible. The assumption is nonsensical. The Amazon investor will have to decide if they are momentum oriented or if they are the classic value investor. Buy ugly and sell pretty.
In any event management needs to learn how to better communicate and reduce volatility.
Times are a changing for everyone.
George Gutowski writes from a caveat emptor perspective.