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Like millions of other Christmas shoppers, I ran-up a big bill on Amazon.com (AMZN). Actually, I do this throughout the year. The fact is that Amazon's selection and pricing are top-notch. Shipping is also quick.
But these things aren't cheap. On the latest quarterly report, Amazon.com showed a big increase in expenses, which put a crimp in margins. Friday morning trading, the stock was off 8% to $170.
Earnings came to $416 million or $0.91 per share, which compares to $384 million, or $0.85 per share, in the same period a year ago. Over the year, operating expenses were up 38%. As for revenues, these soared 38% to $12.95 billion.
With this kind of growth ramp, it makes sense that Amazon.com is investing aggressively in its business. Part of this is through acquisitions, such as to beef up new offerings (like its recent deal in Europe for video rentals and streaming). There will also be continued investments in fulfillment centers.
Yes, there is always grumbling about these types of capital costs. But then again, it's a key reason Amazon.com is a dominant player in e-commerce. So for investors who want to participate in this growth market, this stock should be attractive when it hits a periodic move on the downside.
Tom Taulli is also the author of several books, including the Complete M&A Handbook and the upcoming book All About Short Selling.
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