Shares Sink as Outlook Disappoints

AMZN prices dropped 7.7% during trading hours as management warned that it may post an operating loss for the first quarter of 2012. The company forecasted quarterly operating performance ranging from -200 million to 100 million, below analyst expectations, as they plan to spend heavily on new categories, such as tablets as well as infrastructure for digital media and cloud computing services. The equity has dropped more than 20% after hitting a record high in October 2011, partially on concerns about the vast amount the company continues to invest in the business, potentially to the detriment of ROI’.

AMZN has outperformed the market since 2008, though it appears to have lost steam in 2011. At $179.46 a share, AMZN is trading at a P/E’ of 35.8x and an EV/IC’ 7.1x, implying the market appears to expect 18% ROI’ with 21% IC’ Growth over the next 5 years, compared to projections for ROI’ compression, implying expectations may be too high.

Copyright 2012, Institute of Strategy & Valuation, All rights reserved
This website, articles, and charts do not constitute investment advice. Please see disclaimer.