The fourth quarter earnings of Amazon will be reported any day and the primary focus will be on the sales figures of the Kindle Fire and the impact it has had on e-commerce in terms of apps, video, music and e-books.
Worries about Amazon’s profit margins have been rampant with rumors that the company will stumble after being forced to sell the Kindle Fire at a slight loss. However, since the launch of Amazon Kindle Fire in mid-November some of these fears have been quelled, with some analysts even expecting an increase in profits in the fourth quarter. Analysts at Wall Street predict the earnings of Amazon to be around $18.2 billion or about 19 cents a share on sales.
An analyst at Jefferies, Youssef Squali, said that Amazon has sold at least four million Kindle Fire units so far after having manufactured around five to six million in total. He believes Amazon will sell at least four million more in the coming quarter, which will allow the company to consolidate in the market. An analyst at Piper Jaffary, Gene Munster, said that hardware sales will not account for a major portion of Amazon’s revenue and could be as little as 15 percent of the total revenue. However other analysts have estimated sales in excess of six million units. Overall e-reader shipments (of all the devices in the Amazon Kindle family) are estimated to be around twelve million units.
Strong e-commerce sales along with the sturdy sales figures of the Kindle Fire tablet indicate that Amazon has managed to get consumers to part with their cash on a budget Android device, something unheard of in a market dominated by the iPad. However, despite the success of the Kindle Fire analysts are of the opinion that the profit margins are still likely to be slim considering Amazon’s investments into Amazon Video and Web Services and distribution centers.
Scott Devitt, an analyst from Morgan Stanley, however, predicts that the investments will soon being to pay off or be scaled down a bit. Devitt said that in either case profit margins are likely to go up. He added that though Amazon has gone through investment cycles before, it has never been as deep or as prolonged as the current one which has gone on for seven quarters now. The likelihood for an inflection point is growing with each passing quarter, which makes it probable that Amazon will reduce investment spending if the results don’t start coming in the next quarter or two. Buy the Kindle Fire for $199.
