Amazon (NasdaqGS: AMZN) will likely guide the action in retail exchange traded funds (ETFs) on Wednesday after the company reported quarterly earnings that missed expectations.
Amazon shares weakened in after-hours trading Tuesday following the earnings release as investors worried about the company’s lower operating margin in the first quarter.
Profit margin has been a concern recently for Amazon “because of higher spending to expand into different product offerings and support the growth of the business,” said BWS Financial in an earnings outlook.
On the conference call Tuesday, Amazon executives continued to talk enthusiastically about the Kindle e-book business.
“We’re incredibly excited with Kindle, because we see that customers are buying a lot more books,” said Chief Financial Officer Tom Szkutak. “We love the potential that it has long-term. And we continue to invest in that business.”
Wall Street analysts are always looking for more numbers on Amazon’s new businesses like Kindle and cloud computing.
“As more media products are sold in digital formats, Amazon’s physical warehouses and distribution network may not provide the same advantages,” investment researcher Morningstar said in a profile of the company. “Although the company is off to a good start with the Kindle, digital initiatives for music and movies have fared poorly.”
SPDR S&P Retail ETF (NYSEArca: XRT), which includes Amazon in the portfolio, is up about 10% so far this year.
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.