, Inc. (AMZN): Expansions Affecting Profitability

0, 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, 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.

Apple Inc. (NASDAQ:AAPL),, Inc. (NASDAQ:AMZN), Cisco Systems, Inc. (NASDAQ:CSCO), tech stocks

While discussing AWS (Amazon Web Service), Mr. Josey feels that AWS is now an integral part of, 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, Inc. (NASDAQ:AMZN) slashed prices for AWS in April 2014. Mr. Josey has given, Inc. (NASDAQ:AMZN)’s stock a ‘Market Perform’ rating and believes that the amount, 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, Inc. (NASDAQ:AMZN)’s stocks and also makes a market in it.

Disclosure: None

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