If you're looking for any consistency on Wall Street, forget about it. Earlier this week Amazon reported earnings that missed Wall St. estimates by quite a bit. All told, Amazon reported net income of $97 million (a decrease of 45% year over year) and EPS of $0.21 compared to $0.38 per share during the same quarter a year ago.
Analysts were expecting earnings of $0.27 a share and $22.26 billion in sales. Amazon delivered $21.27 billion.
So what happened next? Seeing as how Apple tanked by more than 10% after they reported their most profitable quarter in history and exceeded Wall Street's estimates for EPS, doesn't it stand to reason that Amazon would drop as well?
Well as it turns out, investors cheered Amazon's subpar earnings announcement by propelling the stock to all-time highs. Currently, shares of Amazon are trading at $277.37 as the stock is up nearly 7%. In after-hours trading last night, the stock was up by a whopping 10%.
For whatever reason, Wall Street finds itself enamored with Jeff Bezos and Amazon, and despite the fact that the company lost money in 2012 the stock keeps on rising like no tomorrow. Specifically, the company lost $39 million in 2012.
Delving deeper into Amazon's earnings, the nation's largest retailer said that eBook sales are up 70% while physical book sales experienced their lowest growth in 17 years, growing by only 5%.
Looking ahead, Amazon is projecting sales in the $15 billion to $16.6 billion range, slightly below Wall St. estimates of $16.85 billion.
So anyway you look at it, it boggles the mind that Amazon's shares are on the up and up. I suppose that in the rough and tumble world that is the stock market, earnings growth is the name of the game. To that end, if Apple's making money hand over fist, increasing profits by 20% is much more difficult than it is for a company like Amazon that's actually losing money.
Oh well, trying to make sense of the stock market is a losing battle and sometimes you just have to sit back and watch the absurdity unfold.
In any event, the following chart courtesy of Fortune really drives home the discrepancy in how the street views Amazon and Apple.
On the flipside, the New York Times yesterday tried to make sense of investor's delight in Amazon's earnings:
What caught the eye of investors was that operating margins as a percent of consolidated sales rose to 3.2 percent, from 2.7 percent a year ago.
“The carrot for Amazon investors is improvements to margin over time,” said Gene Munster, an analyst with Piper Jaffray. Apple, on the other hand, would need to build a cheaper iPhone to keep growing as fast as it has been, which would slice into its margins.
For more than a decade, Amazon has teetered between minimal profits and no profits. In 2012, it said Tuesday, it lost money. But Wall Street has always been more about promises than results, and Amazon is always on the verge of converting its overwhelming online presence into buckets of cash.
“As long as the dream is there, the stock is going to go up,” Mr. Munster said.
And so it goes on Wall Street.