Oct 25, 2013
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Amazon third-quarter sales top Wall Street expectations

Oct 25, 2013

Amazon.com posted a narrower quarterly loss and better-than-expected sales on Thursday as the company expanded aggressively at home and made inroads into overseas markets, sending its shares up nearly 8 percent in after-hours trade.

Its top-line performance underscored the company's strong momentum as the world's largest Internet retailer prepares to do battle during a crucial U.S. holiday season, which some experts say could be the slowest in years.

Rival Ebay Inc gave a disappointing holiday forecast last week, saying the U.S. economic environment, including consumer confidence, had deteriorated in part because of the U.S. government shutdown.

Amazon forecast sales of between $23.5 billion to $26.5 billion, which analysts called conservative.

"It'll be a somewhat difficult macro environment in the fourth quarter," said Morningstar analyst R.J. Jottovy. "But it looks like the revenue momentum will continue into the fourth quarter."

Amazon becomes the latest tech name to have outperformed in an otherwise dreary earnings season. about 84 percent of technology companies that have reported so far have beat on earnings, and 63 percent on revenue.

The world's largest retailer posted revenue of $17.1 billion in the third quarter, up from $13.8 billion a year earlier. Analysts had expected it to post sales of $16.8 billion on average.

Amazon is trying to turn itself from an online retailer into a broader technology company offering gadgets like tablets to consumers and cloud computing services to corporations and governments.

The evolution has entailed big investments in technology, and content such as videos and music, and all while building distribution centers across the United States and expanding in competitive overseas markets such as China.

It is spending billions of dollars to expand and that has taken a toll on earnings. But investors believe the move will pay off as the spending tapers and margins expand.

Amazon's gross profit margin - a closely watched measure of earnings that excludes several expenses - was 28.6 percent in the second quarter, one of the highest in over a decade by analysts' reckoning.

Third-quarter margins came in about 27.6 percent, in line with what analysts had expected.

Net loss was $41 million in the third quarter, or $0.09 per diluted share, narrowing from a net loss of $274 million, or $0.60 per diluted share, in the third quarter of 2012.

Shares in the company have gained 30 percent this year. It is now valued at 131 times 2014 earnings, among the highest in the market. In after-hours trading on Thursday, Amazon shares climbed to about $350 from a close of $332.21 on the Nasdaq.

"The takeaway is that the third-quarter sales shows that the Amazon value propostion is striking a chord with consumers," Hottovy said.

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