Amazon's Investments Depress Q2 Profits, But Not Its Stock

Investors don’t always demand that companies favor short term results over business-building investments. Just look at what’s happening at Amazon. This evening the company reported Q2 results that would chill most execs. Net income came in at $7M, down 96% from the period last year, on revenues of $12.8B, +29%. The revenue figure missed analysts forecasts for $12.9B. And earnings at a penny a share were below expectations for two pennies. It’s not a blip. Amazon says it expects operating losses in Q3 of as much as $350M vs an operating profit last year of $79M. What did that do to Amazon’s stock? It’s up about 1% after hours. The reason seems to be that investors believe in CEO Jeff Bezos’ story — including that his spending now on additional fulfillment centers, the Kindle Fire tablets and content for Amazon’s streaming services will enable it to become a major force in media as well as retailing. Instead of commenting on his financials, Bezos’ statement on the company earnings report hawked his Amazon Prime $79 a year membership program. He says it’s “the best bargain in the history of shopping – that is not hyperbole.” (Of course it is, but let’s not quibble.) In addition to providing two-day, free shipping for many Amazon items, it offers members opportunities to stream 18,000 movies and TV episodes, and a Kindle lending library with 170,000 titles. Amazon shares are +27% so far in 2012, but just 2.7% over the last 12 months.

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