Published: Fri, February 01, 2019
Business | By Eloise Houston

Amazon shares fall after first-quarter sales forecast misses estimates

Amazon shares fall after first-quarter sales forecast misses estimates

Shares, however, slid 5.4 percent to $1,625 in after-market trades that followed release of the earnings results.

US -based e-commerce giant Amazon posted its Q4 2018 earnings on Thursday, revealing that the company's net sales totaled $72.4 billion United States dollars (roughly $90.07 billion CAD) for the quarter that ended on December 31st, 2018.

Amazon has revealed a record profit as a jump in Christmas sales meant it shrugged off the impact of a hefty pay increase for its staff.

After some fluctuation, shares of Amazon sold off after the report.

Finance chief Brian Olsavsky tried to reassure investors that the company remains on the right track.

Clouding the company's prospects is India, where the government is implementing new rules that place limitations on foreign e-commerce companies.

"That's wildly concerning", said Tom Forte, an analyst at DA Davidson & Co. Building warehouses and data centers around the world, inventing new devices and automating tasks usually done by humans are just some of the places Amazon spends its money. "Up until now, China has been its biggest failure". Though its global operating loss shrunk to $642 million in the quarter from $919 million a year earlier, new regulations in India are poised to take a toll. The cloud business has become crucial to the success of its parent, not only for revenue but also for profits.

Nicholas Hyett, analyst at Hargreaves Lansdown, said the online retailer was "tightening its grip" on its customers with add-on services such as Amazon Prime which offer free delivery and other benefits.

On a 30-minute earnings call with analysts, Bezos' planned split from wife MacKenzie never came up - despite brewing concerns over how the couple of 25 years might divide up their 16 percent stake in Amazon and whether Bezos' role in the company could change as a result.

Yet investors focused their attention on Amazon's worldwide operation, where the company has long lost money in the hopes of future profit. The forecast was on the low end of analyst expectations' of about $61 billion. It has just published its financial reports for the fourth quarter of previous year, and it says its revenue is up 45 per cent. That's a 29.6 per cent margin versus 26.5 per cent.

Amazon is expected to roll out the attribution tool more widely this year, and advertisers say the early results were already promising, showing that Amazon ads are driving sales. It was the second quarter in a row Amazon predicted softer-than-expected revenue.

Shoppers will spend $484 billion globally on Amazon this year, up 26 per cent from 2018, and the Seattle-based company will capture more than half of all online spending in the US, according to EMarketer Inc. 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.

Last year, Amazon streamlined its ad products so they were less confusing to brands, and folded them under the Amazon Advertising moniker.

Shares of the company fell 1.1 percent to $1,700 in trading after the bell.

A tight labor market, rising shipping costs and money-losing investments overseas remain threats.

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