Amazon's Profit Falls 51% Despite 34% Rise in Revenue; Shares Trading Lower

After yesterday's close, Amazon.com announced its fourth-quarter profit fell 51% sending shares lower by $1.00, or 2.58%, to $37.70 in pre-market action. By the numbers, earnings fell to $98 million, good for EPS of $0.23, versus earnings of $199 million (EPS of $0.47) a year earlier. The drop in profit occurred despite a 34% increase in sales to $3.99 billion. Part of the reason for the decline in net earnings stemmed from the loss of a $38 million tax benefit in the prior-year period. Gross margin fell to 21.3% from 22.4% a year earlier. Analysts were expecting EPS of $0.21 on sales of $3.76 billion. Looking ahead, Amazon forecast first-quarter revenue of between $2.85-$3 billion, exceeding consensus estimates of $2.74 billion; full-year sales are projected at $13-$13.7 billion, ahead of the $12.6 billion analysts were projecting.

Sources: Amazon.com Q4 2006 Earnings Call Transcript, Press Release, Wall Street Journal, N.Y. Times, MarketWatch, Bloomberg
Commentary: Color On Amazon's Quarter, Notable Nuggets From Amazon's Report, Cramer's Take On AMZN
Stocks/ETFs to watch: Amazon.com (AMZN). Competitors: Amazon.com (AMZN), eBay (EBAY), Overstock.com (OSTK), Wal-Mart (WMT), Target (TGT), Best Buy (BBY), Circuit City (CC). ETFs: First Tr DJ Internet Index Fd (FDN), Internet HOLDRS (HHH), Retail HOLDRS (RTH)

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