Amazon Shares Ride Sideways During Holiday Season

By Douglas A. McIntyre Updated Jan 12, 5:12AM EST · Published Dec 22, 6:50AM EST

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Amazon Shares Ride Sideways During Holiday Season — © Thinkstock

The stock of Amazon.com Inc. (NASDAQ: AMZN) has barely moved over the past month and trades around $1,175. The news is strange because many analysts believe the company will take a huge share of holiday sales. Either investors are worried about whether Amazon’s revenue will do as well as expected or that the e-commerce company will need to sacrifice margins to keep or gain market share as it has in the past.

Amazon is the odds-on favorite to take sales from old-line retailers like J.C. Penney and Macy’s. Some experts believe Walmart has made enough changes to its e-commerce tactics and pricing that Amazon will not make much dent in its results. Regardless, by far the great majority of retailers have to worry Amazon will continue to damage them and help itself.

As it released its third-quarter earnings, Amazon posted optimistic forecasts for the holiday period:

Fourth Quarter 2017 Guidance

Net sales are expected to be between $56.0 billion and $60.5 billion, or to grow between 28% and 38% compared with fourth quarter 2016. This guidance includes approximately 1,000 basis points of impact to our year-over-year growth rate from Whole Foods Market. This guidance also anticipates a favorable impact of approximately $1.2 billion or 270 basis points from foreign exchange rates.

Operating income is expected to be between $300 million and $1.65 billion, compared with $1.3 billion in fourth quarter 2016.

This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.

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The low end of the revenue guidance would be a major disappointment, as would the low end of the operating income forecast. Operating income of $300 million would be barely no margin at all. As a matter of fact, because Amazon Web Services (AWS) is so profitable on its own, Amazon’s core e-commerce business could lose money and positive operating income for the fourth quarter might be solely due to AWS operating income.

And Amazon has been aggressive with prices, particularly with its own new line of consumer electronics, which include the Echo Dot home speaker and voice recognition, which makes it a sort of personal assistant. Its price has been cut from $49.99 to $29.99. Its big brother, the Echo, is on sale for $79, down from $99.99.

Amazon should have a good holiday season, and it should show up in revenue. Margin is another matter, and one that has dogged investors for year. The fourth quarter had better be different, or Amazon’s shares will be much worse off than flat.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.