After the wild ride that Google Inc (NASDAQ:GOOG) took the market on last Thursday, Amazon.com, Inc. (NASDAQ:AMZN) earnings are likely to be watched very closely this afternoon. The company will release numbers for the third quarter after the market closes today, and the last five days of trading indicate a certain amount of optimism about the coming release.
Analysts following Amazon.com, Inc. (NASDAQ:AMZN) are expecting the company to show a loss of 10 cents per share of the third quarter of 2013. Revenue is expected to come in at $16.8 billion. In the same three months of 2012 Amazon.com lost 28 cents per share and brought in revenue of $13.8 billion.
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Amazon.com, Inc. (NASDAQ:AMZN) is one of the most impressively valued high market cap companies on the market, but the firm is expected to lose money in at least one quarter of every year. The firm’s stock trades at more than 400 times expected 2013 earnings, but it didn’t make a profit in 2012.
This is a worry for any investor keeping part of their money in Amazon.com, Inc. (NASDAQ:AMZN) shares. The firm is constantly trying to invest in revenue opportunities, but it doesn’t seem all that interested in making a profit. Investors have so far trusted the company’s management to continue on this path, but it is not clear how long investors will hold out if the value of stock begins to plateau.
Amazon.com, Inc. (NASDAQ:AMZN) has been able to grow its revenue at an impressive rate, and it will have to turn that into earnings at some point in the future. Management at the firm has been pretty quiet about when it plans on delivering earnings, however, and that leaves the company’s shareholders with nothing but hope to go on.
The online retail king is difficult to value, but it is still an incredible company. It’s managed to do things right in almost every business it operates in for several years. Investors are able to give the company the benefit of the doubt because they trust the company’s management to deliver in time.
The reason that Amazon.com, Inc. (NASDAQ:AMZN) cannot deliver earnings on a revenue base of $70 billion a year is that the company is always investing in its business. Amazon cuts margins to zero in order to sell high-profile products like its Kindle Fire range of tablets. It spends a large amount of money setting up new operations, like Amazon media streaming and Amazon Web Services.
These businesses are not enough to bring a profit to the company, but they are enough to keep expanding the firm’s revenues. Amazon is overvalued by almost any metric, but its share price has been kept high on the backs of traders who believe in the vision of Jeff Bezos, or at least believe in the belief of other investors.
This afternoon’s earnings report could result in some serious volatility as a result of the company’s valuations. Many analysts think that there is little upside to Amazon.com, Inc. (NASDAQ:AMZN) stock on earnings, but that could easily have been said about Netflix, Inc. (NASDAQ:NFLX) before its number came out.
When Netflix showed its earnings on Monday afternoon, shares exploded upward and opened on Tuesday at close to $400. The value of the company declined through that day’s trading. Amazon.com, Inc. (NASDAQ:AMZN) might have an upside if earnings come in better than expected.
That doesn’t mean that investors should buy in, however. There are a lot of investors buying into the firm’s stock at ridiculous prices. Amazon earnings are volatile. That doesn’t mean the stock is bound to go up, it means a crash could be harder.