Tough Audience for Amazon.com

Amazon.com’s Q1 numbers, released after Wednesday’s market close, offer the first tangible evidence that the company is turning toward profitability.

The news couldn’t have come at a better time, both for investors who have
grown increasingly impatient with the online e-tailer?s mounting losses and for other e-tailers desperate to remove the stench of death permeating the sector.

But while the Nasdaq rallied on Thursday, Amazon.com’s stock barely budged,
with shares up only 1/4 by mid-afternoon from Wednesday’s closing price of
51-1/2.

The market?s indifferent reaction comes even as the leading e-tailer in the
first quarter: nearly doubled revenue to $574 million from $294 million in
the year-ago quarter; posted a smaller-than-expected operating loss; had a
lower net loss ($308 million) than in the fourth quarter; and predicted
operating profitability this year for its U.S. books, music and DVD/video
divisions.

That’s a far cry from previous quarters, when CEO Jeff Bezos steadfastly
insisted that Amazon.com (AMZN) would stick with its fast-growth strategy.

Some analysts, citing revenue growth and the slight reduction in net loss
from Q4, now predict Amazon.com could achieve profitability by the second
quarter of next year.

Judging from initial trading after the earnings report was released,
investors are more skeptical, and I don’t blame them. There’s a lot of
ground standing between $308 million in losses and profitability, and I?ve
seen no indication that Amazon.com can cover that ground within a year.

Indeed, with only one quarter of reduced sequential losses under its belt,
I think it’s way too early to tell of Amazon.com truly is headed in the
right direction. Let’s see what Q2 brings before we schedule any victory
celebrations.

News Around the Web