Amazon Share Value Dips Despite Record Profits
Despite a record profit over the last quarter, Amazon shares are sliding after predicting a slower sales forecast approaching Christmas.
The digital shopping giant has said it will see a much lower growth of 10 or 20% over the next financial quarter, compared to last quarter’s 29% growth.
Stellar Profits
Sales in the last three months reached a whopping $56.6bn, resulting in record profits of almost $3bn.
It was the fourth quarter in a row of over $1 billion in profit, compared to last year’s total profit of $256m.
The rise in profits, despite an increase in costs of 21%, was largely influenced by investments outside of its retail monopoly.
In particular, profits were driven by Amazon Prime which offers original digital content to rival Netflix and AWS, which focuses on cloud services for businesses.
In the last quarter, the company released new Business Prime benefits for the markets in the USA, Germany and Japan. However retail remains the bulk of revenue, particularly in North America.
So Why The Share Price Drop?
Despite Amazon’s grip on the market, it is facing increased competition from other giants such as Walmart developing their online presence.
GlobalData Retail blamed the changes and development in the retail industry: “There is more online competition in online retail than there has ever been, and that competition is more effective than it has ever been.”
The rise in costs has also worried investors. After significant pressure from social media and politicians, Amazon recently promised to raise the minimum wage at their infamous warehouses to $15 an hour, increasing staffing costs to an expected $3bn next year.
Amazon has also blamed economic uncertainty and currency fluctuations for the predicted lower takings, but maintained that consumer demand was still strong.
Forecasts
However, despite Amazon stock rising by 40% this year, the recent modest forecast has seen shares sliding by almost 8% in after-hours trading.
Equity analyst at Hargreaves Lansdown, George Salmon, pointed out that swings are to be expected in companies at such a high level, and that Amazon remains a strong company despite the disappointing forecast.
Amazon CEO Jeff Bezos said, “Amazon Business is adding customers rapidly, including large educational institutions, local governments and more than half of the Fortune 100.”