Amazon.com earning release 1-27-2011

On 1/28/2011, Amazon's stock price dropped more than 7% to 171 after a concerning earning report. I'm surprised to see Amazon didn't do well comparing with same quarter last year since the weather from holiday season till now favors online shopping. How did the company do anyway? It did well in general except for the efficiency which is really important for companies like Amazon.com and Walmart.

Amazon's sales has a great seasonal pattern so you have to compare within same quarters for different years as you look at ratios. If you look at Asset turnover for 4th quarters you'll find 0.79 vs 0.84, this year vs last year. 

Similarly if you look at the inventory turnover ratios for the quarterly results you should find this year's number is not as good as last year. I believe these efficiency numbers are the main driver worrying investors, sending the stock 7% lower. Well, of course, the general market condition is in the correction mood which also encouraged some taking profit. 

Now let's take a look at Amazon's earning surprises and market reactions. 

It has been the 3rd quarters since Amazon hasn't delivered nice surprises. And the stock price is actually still pretty close to its all time high. If the market goes down from here I would expect Amazon will go down further. However, I personally like the company and I believe it will become more dominant in the future so I'll definitely load its stock when bargain price comes along. When I get more time I'll do a more thorough research on Amazon. It should be worth my time investment:).