Amazon Stock Drops On Missed Estimates, High Expenses

There’s a good reason Amazon (NSDQ: AMZN) released its Q4 earnings results after market closed: investors were surprised by the how the combination of holiday discounts and expenses ate into company profits. The stock was being hammered in after-hours trading, falling 9 percent to $184.45 just after the company’s earnings call.

As Amazon’s earnings release detailed, profits and revenues were both up 36 percent and 8 percent, respectively.

For the current quarter, Amazon projected revenue to range between $9.1 billion and $9.9 billion. Analysts had been expecting revenue of $9.31 billion, according to Thomson Reuters.

While the sales numbers are generally healthy, it’s also a double-edged sword. “In order to continue to meet this demand they’re having to invest in fulfillment and distribution and that’s taking a little bit of a short-term margin toll,” analyst Ken Sena at Evercore Partners was quoted by Reuters (NYSE: TRI) as saying.

To get an idea of what that means, spending on fulfillment in Q4 was up 44 percent, while marketing expenses and cost of sales each ballooned 37 percent.