When it Comes to Amazon's Surging Revenue, Profit is Elusive

When it Comes to Amazon's Surging Revenue, Profit is ElusiveNever mind profits — what’s important is revenue and lots of it, as least as far as e-commerce giant Amazon is concerned.
Take Amazon’s third-quarter as a prime example. The online retailer reported 24 percent higher revenue of $17.1 billion, beating expectations by 2 percent on strong sales growth on just about every category of goods.
However, that massive volume of sales failed to generate a profit. Amazon lost 9 cents a share, or $41 million, as most observers and the company anticipated.
But Amazon is also investing in warehouses and new ventures which have yet to lead to sustainable profits.
Most investors who are bullish on Amazon see these ventures as a ground-breaking to a solid foundation for profit growth.
Amazon critics say the company’s increase in the free shipping minimum to $35 from $25 signals that Amazon needs to focus on its bread and butter retail business.
While Amazon has been growing as a provider of computer services to other companies, it remains primarily a retailer. The Amazon unit that sells computer services 58 percent. Nonetheless, Amazon still gets just 6 percent of total revenue from this unit.
Amazon also still highly pushing digital tablets and electronic readers, despite powerful competition from Apple’s iPad, Microsoft’s Surface and devices running Google’s Android operating system.
The prospects for the holiday shopping season is uncertain for Amazon. The company said sales might jump as little as 10 percent, or as much as 25 percent, compared with the fourth quarter of 2012.  It also warned it might lose money, further fueling the profitability concerns among bearish investors.
“Amazon is the teacher’s pet of Wall Street,” Sucharita Mulpuru, an analyst with Forrester Research, told the New York Times. “There is no other company in the entire world that has the consistently abominable rate of profitability they do and yet has the stratospheric valuation they do.”

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