NEW YORK (AP) ? Amazon.com took a hit Friday after its revenue forecast caught investors off guard.
THE SPARK: Amazon's first-quarter earnings were stronger than expected and revenue was in the ball park. For the current quarter, however, the company projected revenue of $14.5 billion to $16.2 billion. The midpoint of the range is lower than the $15.92 billion that analysts' estimates, according to FactSet.
Canaccord analyst Michael Graham said Amazon's first-quarter results were "marked by solid growth, especially in North America, while International growth stalled" even after adjusting for currency fluctuations. He added that with Amazon's heavy investments leading to prolonged low profit margins, the company's stock "may stall for a bit" in the face of decelerating revenue growth.
While analysts are accustomed to conservative outlooks from the world's largest online retailer, Graham described it as slightly more bearish than the usual low end.
BACKGROUND: The company has been investing heavily in enhancing its distribution network, its shopping website and its Kindle business as part of a long-term growth plan. Because of that, and deep discounts it offers customers, Amazon's profit margins have been thin.
SHARE ACTION: Shares of Amazon.com Inc., based in Seattle, fell $19.53, or 7.1 percent, to $255.17 in midday trading. The stock has traded in the 52-week range of $206.37 and $284.72.
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