Shares of Amazon.com, Inc. (NASDAQ:AMZN) are trading sharply lower in the pre-market session below $200 mark as the company spooked investors by forecasting worse-than-estimated earnings for its fourth quarter. Moreover the company also reported lower than estimated third quarter profit hurt by increased spending and investment on its new Kindle Fire tablet computer.
The company projects to generate revenue of $16.34 billion to $18.65 billion in fourth quarter, implying revenue growth 27-44% year-over-year, missing analysts’ estimates of revenue of $18.15 billion.
Moreover, due to increased spending on new products and increase shipping cost, the company now projects to have $200 million operating loss to a $250 million operating profit in the holiday quarter, while analysts were estimating $374 million in operating profit in the fourth quarter.
Amazon’s forecast signals a profit margin of “effectively zero.”
Amazon.com reported net income of $63 million, or 14 cents a share in its third quarter despite its revenue grew 44% to $10.88 billion, missing analysts’ estimates of 24 cents a share on revenue of $10.95 billion.
The company disclosed its new Kindle Fire tablet in late September at $199, which may not provide the company with nay profit as per many analysts.
Amazon is also investing in video content and other publishing deals to support the device, while spending on datacenters for its cloud computing business and fulfillment for its online retail operations.
Shares of AMZN slumped $28.15 or 12.40% to $199 in the pre-market session.
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