Amazon.com, Inc. (NASDAQ:AMZN) came out with worse than expected second quarter results yesterday. The stock traded down heavily during the aftermarket hours and opened today at $317.18, down more than 10%. Ron Josey, Senior Technical Analyst at JMP Securities, discussed the company’s results and how Amazon.com, Inc. (NASDAQ:AMZN)’s plans for expansions are affecting its profitability, on CNBC’s ‘Earning Central’ program.
“The quarter wasn’t too bad, I think the concern and the reason the stock was down so much in the aftermarket is two things. One, AWS given pricing, AWS growth on a revenue basis slowed down pretty dramatically, but then almost more importantly is their guidance for 3Q it includes a lot of increased costs and I think the big question is whether we are about to embark in a brand new investment spend or this 3Q guidance is just sort of a one time blip where a perfect storm all these costs were came together and that’s the question,” Mr. Josey said.
While discussing AWS (Amazon Web Service), Mr. Josey feels that AWS is now an integral part of Amazon.com, Inc. (NASDAQ:AMZN) business and even though the revenues for AWS are not stated separately, AWS is growing at 60% year on year, but have seen an increase of only 38% in revenues because Amazon.com, Inc. (NASDAQ:AMZN) slashed prices for AWS in April 2014. Mr. Josey has given Amazon.com, Inc. (NASDAQ:AMZN)’s stock a ‘Market Perform’ rating and believes that the amount Amazon.com, Inc. (NASDAQ:AMZN) is going to spend on expansions and the company’s discipline in spending that amount are both, a cause of concern.
“The thing that is surprising, everyone was expecting at least some sort of profitability from an operating income perspective in 3Q and they got it to a negative $200 million. So, certainly losing money it seems at the midpoint and so the question is on what? So they are spending an additional $100 million on content, news rotation centers are coming out here, AWS headcount, expansion overseas. There’s just a lot of things’ going on,” Mr. Josey said.
Analyst Disclosure: Ron Josey’s firm, JMP Securities holds a stake in Amazon.com, Inc. (NASDAQ:AMZN)’s stocks and also makes a market in it.