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October 28, 2011 4:09 pm
Jeff Bezos, Amazon’s founder and chief executive, is a confident risk taker who knows his company is much loved on Wall Street. So a warning this week that it might post a loss in the run-up to Christmas could have been a deliberate test.
Amazon said its operating earnings in the current quarter would fall somewhere between a $200m loss and a $250m profit as it makes big investments in its new Kindle Fire tablet computer and new distribution centres.
If it was a test, the result was clear: it will take more than that to dampen the flames of Wall Street’s longest-running internet romance.
Had a plain old bricks-and-mortar retailer issued such a warning its share price would have collapsed, along with any hope that it could survive in the US’s sickly consumer economy.
But thanks to Mr Bezos’s record of picking investments that eventually yield profits – and the way he hauled a loss-making Amazon back from the brink after the internet bubble – the company is treated differently.
It shares did plunge 12 per cent on Wednesday and there were grumbles about the company’s opacity. Yet the stock recovered by 4 per cent on Thursday and gained a further 6.6 per cent on Friday.
While Amazon reported a 44 per cent leap in sales to $10.9bn in the three months to September 30, its operating profit margin shrank to 0.7 per cent versus 2 per cent the previous quarter and 3.5 per cent a year ago.
Still, the company has retained its dizzying valuation: it is worth a staggering 89 times the earnings that analysts expect for 2012.
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