Amazon.com, Inc. (AMZN): Growth Before Profits?

Right from the time Amazon.com, Inc. (NASDAQ:AMZN) came out with its second quarter results after the bell yesterday, the discussion on the Street seem to be focused on why the company can’t post a profit even though its revenues grow quarter after quarter. To make matters worse this quarter, Amazon.com, Inc. (NASDAQ:AMZN) also gave a grim outlook for the third quarter acknowledging that the losses could go up much higher.

Colin Gillis, Senior Tech Analyst at BGC partners was seen discussing Amazon.com, Inc. (NASDAQ:AMZN)’s business strategy and second quarter loss with Bloomberg’s Cory Johnson, Adam Satariano and Emily Chang on ‘Bloomberg West’. Mr. Gillis believes that investors of Amazon.com, Inc. (NASDAQ:AMZN) are getting increasingly concerned that even though the company’s revenue are growing, it’s not able to generate any profits.

“It has changed to a new trading pattern this year and again we’ll see if the losses stick, but you know Amazon is down before the print [quarterly results] it was down 10% year to date, it is significantly underperforming the marketplace, the broader market and the snapback after each quarter because you know people look at the potential that Amazon has. If they could only drive a little bit of margin on their revenue, it will be quite meaningful, but this new investment cycle with the tech and the content, these investments are going to be ongoing. They are not necessarily going to get the leverage that investors were hoping for,” Mr. Gillis said.

Mr. Johnson highlighted the fact that the earnings of Amazon.com, Inc. (NASDAQ:AMZN) has been dismal because there has been a price war going on in the cloud computing market, where Amazon.com, Inc. (NASDAQ:AMZN) is a big player with its AWS (Amazon Web Services). He added that Amazon.com, Inc. (NASDAQ:AMZN)’s habit of disclosing much less information that is expected from it is also taking a toll on the company’s investors.

“It’s legal what they are doing, but they disclose very little about some really important things like how big is AWS? What are the revenues for this business? God forbid what are the profit margins for that business and how do they differ from the other margins […],” Mr. Johnson said.

Disclosure: None