Margin Pressure Continues at Amazon.com (AMZN)

Amazon.com Inc. (NASDAQ: AMZN) was hitting all-time highs just last week before earnings were due today, but that was then and this is now.  The online retail giant has now shown its 2010 year-end earnings.  For the quarter it reported $0.91 EPS and a 36% gain in sales to $12.95 billion in revenues versus the Thomson Reuters estimates of $0.88 EPS and $12.98 billion in revenues.  Sales would have been up 37% had it not been for a $139 million currency hit.

Its quarterly guidance was $9.1 billion to $9.9 billion in revenues, a gain of 28% to 39% from a year earlier.  Operating income is expected to be between $260 million and $385 million, a drop of -34% to -2% versus the first quarter 2010.  Thomson Reuters has estimates of $0.76 EPS and $9.3 billion in revenues.  That income guidance does include about $140 million for compensation and amortization expenses.

There are two issues here, one is a slightly soft revenue figure and another is expenses. We calculated roughly 3.8% in operating margins, and the implied margins ahead look to be down to 2.9% to 3.9% depending upon the range.  The margin pressures seem to be continuing here.

While the number of Kindles sold was not disclosed, Amazon said that the Kindle book sale format has now passed its print book sales as the leading format against both hardback and paperback books.

Amazon.com shares closed up 5% at $184.85 today and the 52-week trading range is $105.80 to $191.60, but shares are trading down 10% at $165.96 in the after-hours trading session.

JON C. OGG