All-Time Highs... Amazon's Margin Pressure Continues To Be Forgiven (AMZN)

Amazon.com Inc. (NASDAQ: AMZN) has another report that may be baffling for some investors.  The online retailer of just about everything reported that income fell 8% to $191 million or $0.41 EPS and a 51% gain in sales as $9.91 billion in revenues.  Thomson Reuters had estimates of $0.35 EPS and $9.37 billion in revenues.

Operating income was $201 million in the quarter versus $270 million a year earlier, and the company noted a favorable impact from foreign exchange rates on operating income of $28 million.  Both North America and International segment sales were up 51%, and its worldwide media sales grew 27% to $3.66 billion.

As far as guidance is concerned, Jeff Bezos offered 36% to 47% year over year growth to a range of $10.3 to $11.1 billion in sales and Thomson Reuters estimates for the coming quarter of $0.48 EPS and $10.35 billion in sales.  Operating income was put in a range of $20 to $170 million, a drop of 37% to 93% from a year earlier.

What has been amazing about Amazon is that it has been able to get away with higher cloud and cap-ex spending at the expense of margins.  Now we can expect a new tablet PC later this year, and the company is still fighting tax issues in states while continuing to invest.  The company showed that operating margin was down to 2.0% in the quarter, but it then listed as 3.1% later on in the release for its trailing twelve months.  This trend has continued to be baffling for many financial forecasters looking into Amazon’s metrics.

After closing up 0.3% at $214.18, shares are trading up at an all-time high just north of $225.00.  The 52-week trading range is $114.51 to $220.20.  We picked for Amazon to be among the next mega-cap stocks and its market cap at the close was $96.8 billion.  If this after-hours level holds up, Amazon will join the $100 billion club on Wednesday.

JON C. OGG