Amazon profit prediction disappoints Investors

Investor got shocked upon Inc announces a far weaker-than-expected outlook for the decisive holiday season quarter as it spent a lot on its new Kindle Fire tablet computer.

The stock fell down 12 percent Tuesday in comprehensive trading as the news raised concerning Amazon’s loses some of the revenue momentum, which had helped investors forget its razor-thin profit margins.

Amazon prediction on the fourth-quarter revenue of $16.34 billion to $18.65 billion, compared with analysts’ average calculation of $18.15 billion.

Amazon’s prediction would mean 27 to 44 percent increase from a year beforehand. In the third quarter, sales increased 44 percent, below the 51 percent increase in the second quarter.

The company also said it could report a $200 million in service loss to  $250 million operating earnings in the holiday quarter as it uses on the Fire and other initiatives.

That prediction, including $200 million for stock-based compensation and subtle assets, was “materially” less than Wall Street expectations, according to UBS analysts Brian Pitz and Brian Fitzgerald. They look for $374 million in operating income in the fourth quarter.

Evercore Partners analyst Ken Sena says they are not seeing any pay off from the investment as of now. He believes that the most of the investors are impatient with regards to the money that they are expecting that would come back to them.

Analyst at Jefferies & Co., Youssef Squali noted that Amazon’s fourth-quarter prediction meant that the profit margin will be equal zero.

On Tuesday, Amazon disclosed its third-quarter net income was $63 million, or 14 cents a share, versus $231 million, or 51 cents a share, a year beforehand. Proceeds were $10.88 billion, up 44 percent from the third quarter of 2010, it added.

Reuters claims that Analysts had anticipated of earnings per share of 24 cents on revenue of $10.95 billion.

Moran had projected third-quarter profit growth of as much as 50 percent.

The company revealed its latest Kindle Fire tablet in late September, and many analysts believe it can be sold close to the cost of making it, or even at a loss.

Chief executive of ChannelAdvisor, Scot Wingo believes the revenue so small, but the margin is where the biggest discrepancy is from Wall Street’s expectations.  He added that this is because of the amount of money that Amazon had invested in the Kindle Fire.

Aside from the Kindle, Amazon also put its investments in video content and other publishing deals in order to support the device, at the same time as spending on datacenters for its cloud computing business and success for its online retail operations.