Investors get a ray of hope in a dismal earnings season as Amazon.com says it will post a smaller-than-expected loss for the first quarter amid strong electronics sales.
They responded to the news by boosting Amazon some 40 percent in morning trading, up $3.38 to $11.75. With about 90 minutes left in the regular session, the stock was up $2.68, or more than 32 percent, to $11.05.
The online retailer said it would post a pro forma loss of slightly less than $50 million, or about 22 cents per share. That's smaller than the 30 cent a share loss analysts were expecting, according to First Call, and down from the 35 cents per share loss it posted in the year-ago quarter.
Amazon said it should see net sales of more than $695 million, compared with the $669.58 million predicted by a First Call's survey of analysts. In the year-ago quarter, the company posted revenues of $574 million.
Amazon also reaffirmed earlier forecasts for 2001, which included predictions of a pro forma profit in the fourth quarter.
"I think it caught every one by surprise," said analyst Tim Albright at Salomon Smith Barney.
Albright said the news could mean that consumer-based businesses, traditionally hit hard in tough economic times, could fare slightly better than expected this time around.
"What this says to me broadly is that consumers are less volatile (than) IT managers," he said. "Companies that are just consumer-based may be less exposed to big volatile swings in revenue than companies dependent upon IT managers deciding whether to buy software and equipment."
Jeffrey Fieler, analyst at Bear Stearns, speculated that Amazon may also have benefited from the death of competing dot-coms, saying that "the pricing environment continues (to be) benign as the competitive landscape of online retailers becomes littered with casualties."
Fieler did, however, drop estimates for the year by a dime to a per-share loss of 83 cents.
And ABN Amro's Arthur Newman cautioned that "a key question is whether the company has materially reduced overall losses in early stage/international (categories)."
Amazon's outlook is a welcome dose of good news for the tech sector. A record number of Internet and technology companies have issued profit warnings for the first quarter, according to First Call.
Earnings for the Standard & Poor's 500 tech sector were expected to fall 36 percent year over year in the first quarter. Analysts cut earnings forecasts 40 percent since Jan. 1 and 13 percent since March 1.
Gross profit is expected to be about $175 million. Amazon said the net loss should be less than $255 million, including a $105 million charge for restructuring.
CEO Jeff Bezos called the quarter "excellent," saying that "for the fifth consecutive quarter we saw substantial improvement in our operations and bottom-line performance. Electronics demonstrated especially strong growth and improvements."
Sales of books, music and videos in the United States--Amazon's only profitable division--were up slightly, although the company said gross profit in those categories increased more than 30 percent.
The company will formally announce results on April 24.
Amazon had cash and marketable securities of more than $640 million, at the end of the quarter, and that number is expected to rise to more than $900 million by Dec. 31.
That's a key figure for Amazon; analysts have expressed concern that the high-flying retailer could fall victim to credit concerns.
In February, then-Lehman Brothers bond analyst Ravi Suria issued a report warning that the company's working capital--defined as current assets minus liabilities--would head into the red later this year, prompting suppliers to refuse to ship items on credit.
Suria, who has since left Lehman, had taken aim at Amazon before, particularly concerning its cash position.
And though some analysts disagree with his numbers, Suria wasn't alone in expressing concern about the company.
In January, Amazon announced a restructuring plan that included laying off 15 percent of its staff.
Albright said that Monday's news could help dash the credit fears.
"It does give us more comfort in Amazon's ability to break even in the fourth quarter, and in breaking even, Amazon will start to counter the arguments suggesting that Amazon is going to go bankrupt," he said. "We know they've got a good cash model but that doesn't mean anything if they're not profitable."