On Thursday, Amazon Inc forecast its first-quarter sales. It was well below the estimated value by Wall Street. The company stated that the latest regulations in India had caused uncertainty in one of its key markets. The company also mentioned that they would be stepping up investments in 2019.
Share prices dropped by five percent to $1,635 after Amazon Inc released its forecast for the first-quarter sales. The latest forecast overshadowed the e-commerce giant’s record profits and sales during the holiday season. Free and fast shipping helped Amazon, the world’s largest retailer boost its revenue by over twenty percent. Its lucrative cloud computing business and the fees paid by merchants for shipping and advertising has helped fatten up Amazon’s once thin profit margin.
The net income jumped sixty-three percent to $3 billion for the fourth quarter, way ahead of analysts’ estimates. However, investors remain focused on Amazon’s international operations, where it has lost money in the hopes of profit in the future. Although its operating loss reduced to $642 million from last year’s $919, the new regulations are expected to cause further loss. The rules were introduced by the Indian government to protect local businesses by banning foreign e-commerce companies from offering products on their platforms via vendors in which they already have an equity interest.
According to Brian Olsavsky, Chief Financial Officer at Amazon, the situation in India is not exactly stable that the moment. The new rules will kick in on Feb 1, and the company has already started removing many products from its Indian website to comply with them. However, Olsavsky still maintains that India is a good long-term opportunity for the company.
Colin Sebastian, an analyst at Baird Equity Research, said that the current issues in India have already taken a toll on the first quarter outlook. Although the report is not particularly bad, some questions have been raised about how the stocks will perform under pressure. Amazon forecast a net sales of fifty-six billion dollars and sixty billion dollars for Q1, missing the mark on the analysts’ estimate average of $60.77 billion.
Olsavsky also stated that investments by Amazon would be increased this year. The company did not need to invest much in 2018 as they had already splurged on headcount, warehouses, and other areas, helping boost profit. However, this year, investments are expected to rise. Olsavsky did not give further details about where or how much.