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Amazon, Wall Street & the ‘Expectations’ Game

Love ’em or hate ’em, you have to admire the juggernaut that is and its founder Jeff Bezos.

Amazon continues to maintain its technological edge to remain the leading e-commerce site — among other businesses it has — in the world.

The only chink in Amazon’s armor, according to some Wall Street naysayers over the years, is that its stock price is too high given its spotty record of posting quarterly or annual net profits and reinvesting any into its business operations. Many have said that Amazon’s stock price has been inflated because it created an alternative narrative in the market, where its stock is based not on profit performance but on its ability to generate cash.

Well, yesterday Amazon reported its fourth-quarter and annual financial performances for last year, and its net profitability and sales for both soared while maintaining its mammoth cash flow.

So it’s a great day to be an Amazon stockholder, right? Wrong. The stock took a beating on Wall Street.

Why? Its performances in the quarter and the year “did not meet expectations.”

Those are the “expectations” of the geniuses of Wall Street who see all, know all … or like to think so. I could easily go into a political tirade about the denizens of that amoral place, but I’ll put it this way: Guys who ran Vegas casinos in the 1950s and 1960s had more ethics than some in today’s investment community.

This reminds me of when Carly Fiorina was president/CEO of Hewlett-Packard. She infuriated the old guard there, bought Compaq, and on a regular basis delivered profits of several hundred million dollars on a quarterly basis. Yet I remember reading during that period whenever HP released its financials that it “did not meet the expectations” of that era’s Wall Street experts.

I should say that I don’t own stock in Amazon, and I don’t have a horse in this race. TWICE, even though we run plenty of financials for companies in the industry, is certainly not an investment guide. We run financials to let everyone know how publicly-held companies in the industry are doing, so you can compare their performances with your own.

I am sure that any CE manufacturer, retailer or distributor reading this would gratefully take a fraction of Amazon’s performance for the quarter and the year and be happy. 

 Somebody should tell Wall Street about the KISS philosophy (“keep it simple stupid”) and just look at the numbers. Granted, Amazon’s stock did benefit for years when Wall Street was judging it based on “potential” (a damning word sometimes) vs. net profits. Now that Amazon has proven it can generate substantial profits for an entire year and the key fourth-quarter selling season, its stock goes down.

It makes no sense to me, but I don’t work on Wall Street.