Amazon.com Inc. (NASDAQ:AMZN) reported a surprise net loss as the world’s largest online retailer continued to pump money into warehouses and digital content, fueling sales growth at the expense of profits.
The second-quarter net loss was $7 million, or 2 cents a share, compared with profit of $7 million, or 1 cent, a year earlier, the Seattle-based company said in a statement yesterday. Analysts had projected net income of $28.8 million on average, or 6 cents, according to data compiled by Bloomberg.
Chief Executive Officer Jeff Bezos is betting that near-term investments on cloud computing and a massive delivery infrastructure that lets the company send packages anywhere in the country in two days will provide cash flow down the line. Operating expenses rose 23 percent in the latest quarter, as Amazon built out its digital media business, which delivers books, music and shows to its Kindle handheld devices.
“The clock is ticking for Amazon to show that it can sell its goods and services while making a profit that might start to justify its market capitalization,” said Colin Gillis, an analyst at BGC Partners LP in New York who rates the shares hold.
Amazon fell as much as 2.6 percent to $295.60 in early trading. While the online retailer ended 2012 with a loss of $39 million, investors have rewarded Bezos’s investment strategy with one of the highest valuations among the company’s peers. Amazon is trading at about 55 times next year’s earnings, compared with a price-to-earnings ratio of 16 for EBay Inc., according to data compiled by Bloomberg.
Amazon’s revenue rose 22 percent to $15.7 billion from $12.8 billion, matching analysts’ average estimate. The sales are adding to a U.S. e-commerce market projected to increase to $370 billion in 2017.
Revenue in the current quarter will be $15.5 billion to $17.2 billion, Amazon said, compared with analysts’ estimate for $17 billion on average.
Amazon, which began as an online seller of physical books in 1995, now sells everything from apples to treadmills to millions of customers. It’s also used its Prime membership service to boost loyalty. Members of the program, which ships packages in two days, spend three to four times more than non- members, according to Colin Sebastian, an analyst at Robert Baird & Co. in San Francisco who rates the stock the equivalent of a buy.
The company is seeing more Prime members signing on to access TV shows and movies, Tom Szkutak, Amazon’s chief financial officer, said in a conference call. Spending on technology and content increased 47 percent, the most of any category, primarily from investments in Amazon Web Services, the company’s cloud-computing business, and video content, he said.