Amazon Delivers, But Why a $2 Billion Buyback? (AMZN)

Amazon.com Inc. (NASDAQ: AMZN) has just reported earnings of $0.85 EPS and $9.52 billion in revenues.  Thomson Reuters had estimates of $0.72 EPS and $9.04 billion.  The company sees $6.45 billion to $7 billion in revenues for the coming quarter with operating income of $275 million to $365 million.  We have estimates from Thomson Reuters of $6.36 billion in revenues.

The company also announced that it would repurchase up to $2 billion in stock.  That is great for many companies, but not for companies with expensive shares.  Repurchasing stock at this price almost seems silly other than if the company said it will only do that if shares go on sale (i.e. sell-off).  Are we supposed to interpret that Amazon is going to buy its own stock rather than buy other niche online high-growth niche players?

Amazon shares closed up 2.6% at $126.03 today, but these shares are down 3.7% at $121.77 in the after-hours session.

Today’s numbers looked great, but you have to keep in mind that the stock was at $48.97 for a 2009 low.  With a bias of sell-the-news, what else is there to expect when the expectations were already so high.

JON C. OGG