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Amazon.com stock drops off

Bookseller Amazon.com's stock falls nearly 14 percent in early trading, despite the company's better-than-expected quarter.

2 min read
After announcing a smaller-than-expected loss, (AMZN) stock dropped nearly 14 percent in early trading today.

The online bookseller's stock fell as much as 4-1/4 from yesterday's close of 30-3/4, but by the end of trading today it regained a portion of the losses to close down 3-1/4 at 27-1/2.

Amazon yesterday beat analysts' expectations when it released its quarterly results after the market's close. Yesterday, the company saw its stock surpass for the first time the price achieved on its first day of trading--when its rocket-charged initial public offering stock reached 30. The stock gained over 10 percent in trading to close at 30-3/4.

Amazon.com's net loss was $6.7 million, or 28 cents per share, for the period ending June 30, compared with a net loss of $767,000, or 3 cents a share, for the second quarter last year. Analysts were expecting a loss of 32 cents a share.

"This was a good quarter for us...and we continue to acquire customers at a fast pace," said Jeff Bezos, company founder and chief executive. He added that 50 percent of Amazon.com's orders are from repeat customers.

Sales grew to $27.9 million, up from $2.2 million in the same quarter last year. Sales are also up substantially from the first quarter ending in March, when the company reported sales of $16 million.

Amazon.com's customer accounts grew to more than 610,000 at the end of June, an increase of 79 percent from 340,000 during the previous quarter.

The company also cut prices during the quarter on over 400,000 titles. The company's stock dropped 1-1/4 on the news.

Although the company acknowledges that discounts may hurt in the short term, the long-term benefits are the real goal.

"When we cut prices, it lowers our gross margins in a pretty straight-forward fashion," said Bezos, noting that buying directly from publishers offers volume discounts. "And that will help us over time. We have always been focused on the long term, and we truly believe that this is the right time to invest in this market even though it hurts us in the short term."

Amazon.com said the quarter was marked with milestones for the company and its shareholders. The online bookseller raised $54 million in its public offering in May, and it has been reinvesting and expanding its reach through strategic relationships.

Just last week, Amazon joined up with search engines Yahoo and Excite, and online service provider America Online. Under those agreements, Amazon will receive front page promotion on AOL's Web site that will link users directly to the bookstore. The company hopes its marketing efforts with these companies will fuel brand recognition, traffic, and sales.

Alex. Brown analyst Christopher Feiss last week initiated coverage of Amazon.com with a "buy" rating. He expects revenues to increase more than sixfold to $98 million in 1997. For 1998, he projects $195 million; for 1999, $325 million.