Amazon profits shrink and stock is up nearly 14% - why?

Posted Oct 24th 2006 6:17PM by Melly Alazraki
Filed under: After the Bell, Major Movement, Earnings Reports, Industry, Amazon.com (AMZN)

Amazon.com, Inc. (NASDAQ:AMZN) reported third-quarter earnings this afternoon after the market close. Net income in the quarter fell to $19 million, or 5 cents per share, from $30 million, or 7 cents per share, a year earlier. Sales rose 24% to $2.31 billion.

However, AMZN is up nearly 14% in after-hours trading, or $4.67, to $38.30. Why?

One reason is because analysts expected earnings of 3 cents per share on sales of $2.25 billion. Meaning, that despite the decline in profit, which was mostly attributable to technology spending and a patent litigation settlement, Amazon actually beat estimates. Even the operating profit margin, something many accused Amazon of squeezing, was higher than forecast (although still quite low).

Mind you, though, AMZN is traded at quite a premium compared to its peers, 49 times 2007 earnings. This is higher than eBay, Inc, (NASDAQ:EBAY), its main competitor, but also higher than Yahoo!, Inc. (NASDAQ:YHOO) and even darling Google, Inc. (NASDAQ:GOOG).

So could there be another reason for this jump in stock price? Maybe some people scrambling to cover short positions? Take a look for yourself. The data is from the NASDAQ. What do you think?

Update: NASDAQ just released October short interest for AMZN and it went up by another 1.56% to over 44 million with 6.31 days to cover.

Just noticed that Bambi Francisco has a similar post.

Tags: amazon.com, amzn, short interest, ShortInterest

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Reader Comments (Page 1 of 1)

10-24-2006 @ 8:08PM

gundam1909 said...

I agree part of the afternoon rally is from short sellers. With this result, I'm disappointing with recent performance with eBay. Althoough eBay is bigger than Amazon, they cannot generate that kind of sales growth when compare with Amazon. Unlike Amazon, eBay believe so much in tech and believe people will use their trading platform because they are the best. They didn't have big promote to their site to induce people to visit. If they do this this, eBay not only could get more listing and transaction fees, they could also cut down their ad cost (revenue to Google).

10-25-2006 @ 2:44AM

Helen said...

I'm of the opinion Amazon will do quite well from the disenchanted sellers intending to move from eBay after the Holidays.

It's possible Amazon have already seen some improved results as aome eBay shop sellers have already moved?