Online bookstore Amazon.com, the darling of ecommerce, has again posted a loss, but the stock market is still buying.
A jump in price followed Amazon's full year results, despite a warning from the company's chief executive that small investors should be aware of its volatile share price.
Amazon.com, which has spurred a whole host of online companies to follow its unorthodox business model, said revenue nearly quadrupled to $252.9 million for the fourth quarter ending 31 December, 1998, from $66 million for the same period last year.
But despite the revenue jump, it moved further into the red with a loss of $17.8 million, or 14 cents a share, for the fourth quarter ending 31 December, 1998.
This was wider than the net loss of $10.8 million, or $0.08 cents a share, the company posted for the same quarter last year. It was not as big a gap, however, as the 18 cents per share consensus predicted by analysts.
The online bookstore was quick to point out that its operating loss totalled seven per cent of sales, compared with 17 per cent last year.
Still, there is no disputing Amazon's sales are growing. Its CD sales - still in its infancy compared to books - grew a phenomenal 130 per cent to $33.1 million. Setting up international offices has been a major investment for the online bookstore, but it said that sales outside the US have already quadrupled.
Customer accounts rose to 6.2 million in December, up 300 per cent year on year, with 64 per cent of its orders coming from repeat customers in the fourth quarter.
Jeff Bezos, Amazon founder and chief executive, said the company is committed to building brand awareness and a strong infrastructure this year, so costs and losses were unlikely to reduce.
"Amazon.com is still a small and young company relative to many off line retailers and we must ensure that we build the strongest customer relationships possible during this critical period," he explained, "In 1999, we expect to invest even more aggressively than we have in the past."
At the same time Bezos attempted to put the brakes on the Internet stock frenzy by bluntly warning small investors that its stock was far from stable. Amazon.com's stock has rocketed more than 1,000 per cent in the last 12 months.
"Amazon stock has been extraordinarily volatile," he said, "It should be only a fraction of any individual investor's portfolio. And it shouldn't be any fraction of a short term trader's portfolio."
Analysts welcomed Bezos' comments, but were still loath to make any hard comment on the future of Amazon.com and other similar online retailers.
"It really defies any financial logic," said Matt Page, an analyst with the Strategis Group in the US told 'Newswire', "It is like nothing we have ever seen, the Internet is definitely setting a new paradigm."
Despite Bezos attempt at tempering the market, Amazon's share price surged before the opening of the New York stock market, spurred on my the news that it had made a smaller loss than expected.
Keith Benjamin, senior Internet analyst at finance house BancBoston Robertson Stephens was not discouraged and immediately raised his estimates for next year.
"We continue to view Amazon as an extremely impressive brand with considerable revenue growth potential, which we believe should drive earnings per share leverage long term," he said.
Amazon.com's stock price rose from a low today of $129.5 to a high of $139.75 at time of going to press.
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