You'd think that a large, successful, cash-rich public company would inspire Wall Street confidence by investing in its own future, even if it hurts the bottom line in the short term.
But no. Shares of Amazon.com (NASDAQ: AMZN) plunged as much as 11.5% Wednesday to 172.00 after the Internet retail giant reported a 35% increase in net sales for its fourth quarter, but a 58% decrease in net income.
* Net sales of $17.43 billion were up from $12.95 billion in the fourth quarter of 2010
* Net income was $177 million, or 38 cents a share, compared to $416 million, or 91 cents a share in Q4 2010
* Operating income was $260 million in Q4, versus $474 million in the year-ago quarter
Beyond those quarterly numbers, Amazon's full-year results show a 41% increase in net sales to $48.08 billion and a 45% decrease in net income to $631 million.
What's going on here? Is Amazon.com headed for the rocks?
Of course not. What's happening is that Amazon is spending a lot of money to prepare for future growth, building more warehouses, hiring employees (headcount now exceeds 56,000, or two-thirds more than the payroll from 2010), marketing heavily and investing in technology such as the Kindle Fire tablet.
Amazon's been doing this for more than a year, and it has reported recent quarterly misses without shares being hammered. In fact, the day after Amazon reported Q1 results last April -- which included a 33% decline in net income -- shares gained nearly 8%.
The company also said at the time that it would continue to spend on technology, infrastructure and talent. Investors seemed to like the idea back then; now, not so much.
Granted, shares probably weren't helped by the lower-expected revenue forecast of $12 billion to $13.4 billion in the current quarter -- versus analysts' average estimates of $13.4 billion - or the implication that Amazon could report an operating loss in Q1.
But this is a company built -- and continuing to be built -- for the long-term. As sales continue to increase, albeit slower than analysts may forecast, it only makes sense to build more fulfillment centers. And while Amazon reportedly is losing $15 on every $199 Kindle Fire it sells, the devices ultimately are expected to make up that loss and more through the sale of e-books, music, software and video for use on the Kindles.
Wednesday's sell-off created opportunities for investors who see Amazon's investments in itself as a company strength. And the mad rush to dump AMZN stock at well below the 52-week high of 246.71 set in mid-October probably amused the long shareholders, who are long because they are capable of looking beyond the next quarter.