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Out-of-patience investors sell off Amazon
New York : Amazon has long acted like an ideal customer on its own website: a freewheeling big spender with no worries about balancing a checkbook. Investors confident in founder and CEO Jeff Bezos’ invest-and-expand strategy flooded into the stock as the company revolutionized shopping, upended the book industry and took on the cloud – even though its vast range of initiatives ate up all the company’s profits.
After all, when Amazon.com filed for its IPO 17 years ago, it was very clear: the company would post losses for the ”foreseeable future” while it invested in the business to drive bigger and bigger sales. Stockholders seemed to like playing Bezos’ long game: shares more than quadrupled between 2010 and 2014 to over $400 apiece.
Lately, they’ve lost a little patience.
After the Seattle company on Thursday reported a huge third-quarter loss and issued a disappointing holiday forecast, the stock sold off by nearly 10 percent. It’s now lost 28 percent of its value since the beginning of the year, closing at $287.06 Friday.
Daniel Morgan, a Synovus Trust portfolio manager, invests in Amazon. He has no current plans to sell, but he knows Wall Street investors and analysts ”tend to have very little patience; they don’t really want to hear a long-term story.”
What they want are answers. Particularly when there’s now another e-commerce powerhouse to invest in: Chinese e-commerce player Alibaba, which went public in September in a $25 billion initial public offering, the largest ever.
”Frankly, we believe it’s impossible to predict Amazon’s profitability during this prolonged `investment cycle’, but profit metrics are clearly moving in the wrong direction and it’s a fair question to ask, does Amazon have too many `balls in the air’?” said Wells Fargo analyst Matt Nemer.
”I’ve been wondering, and I think a lot of investors have this question as well, in terms of when things don’t go as anticipated in some of the bigger projects where there’s not a revenue stream… what’s the process for determining whether to plow ahead or turn back capital and redeploy it in other areas?” Stifel Nicolaus analyst Scott Devitt pressed on Amazon’s earnings call Thursday night.
CFO Tom Szkutak defended the company’s strategy but admitted Amazon needs to pick-and-choose its projects.
”We certainly have been in several years now of what I will call in investment mode,” he said on the call. ”There’s still lots of opportunity in front of us but we know that we have to be very selective about which opportunities we pursue. ”
For years, Amazon’s strategy has been spending the money it makes to grow and expand into new areas. It launched a smartphone, the Fire, this summer and has been offering a set-top video-streaming device, a streaming video service and several tablets and e-book readers.
After all, when Amazon.com filed for its IPO 17 years ago, it was very clear: the company would post losses for the ”foreseeable future” while it invested in the business to drive bigger and bigger sales. Stockholders seemed to like playing Bezos’ long game: shares more than quadrupled between 2010 and 2014 to over $400 apiece.
Lately, they’ve lost a little patience.
After the Seattle company on Thursday reported a huge third-quarter loss and issued a disappointing holiday forecast, the stock sold off by nearly 10 percent. It’s now lost 28 percent of its value since the beginning of the year, closing at $287.06 Friday.
Daniel Morgan, a Synovus Trust portfolio manager, invests in Amazon. He has no current plans to sell, but he knows Wall Street investors and analysts ”tend to have very little patience; they don’t really want to hear a long-term story.”
What they want are answers. Particularly when there’s now another e-commerce powerhouse to invest in: Chinese e-commerce player Alibaba, which went public in September in a $25 billion initial public offering, the largest ever.
”Frankly, we believe it’s impossible to predict Amazon’s profitability during this prolonged `investment cycle’, but profit metrics are clearly moving in the wrong direction and it’s a fair question to ask, does Amazon have too many `balls in the air’?” said Wells Fargo analyst Matt Nemer.
”I’ve been wondering, and I think a lot of investors have this question as well, in terms of when things don’t go as anticipated in some of the bigger projects where there’s not a revenue stream… what’s the process for determining whether to plow ahead or turn back capital and redeploy it in other areas?” Stifel Nicolaus analyst Scott Devitt pressed on Amazon’s earnings call Thursday night.
CFO Tom Szkutak defended the company’s strategy but admitted Amazon needs to pick-and-choose its projects.
”We certainly have been in several years now of what I will call in investment mode,” he said on the call. ”There’s still lots of opportunity in front of us but we know that we have to be very selective about which opportunities we pursue. ”
For years, Amazon’s strategy has been spending the money it makes to grow and expand into new areas. It launched a smartphone, the Fire, this summer and has been offering a set-top video-streaming device, a streaming video service and several tablets and e-book readers.
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