NEW YORK (TheStreet) - Amazon's (AMZN) "growth at all cost" mentality is quickly becoming an annoyance for investors and analysts. Persistent growth in the absence of profits is no longer sexy. CEO Jeff Bezos has always been proclaimed the next Steve Jobs, but Apple's (AAPL) founder knew how to make money.
I don't doubt for a moment that Bezos understands the endgame for Amazon. But patience has its limits. After Amazon's first-quarter report revealed another loss, it's time for this company to alter its thinking -- perhaps drastically.
Let's go through the numbers.
As of the Friday close of $308, the stock is down nearly 23% for the year to date but up 21% for the last 52 weeks. For the period ending in March, Amazon reported revenue of roughly $20 billion, which grew 23% year over year. Amazon has never had a problem with revenue and $20 billion was more than enough to beat the consensus. The issue, as noted, has been profitability. Although net income of $108 million was enough to beat estimates, investors were not blown away by the company's persistent spending.
Now, I don't have a problem with the spending, particularly since Amazon's overall health seems solid. The 26% year-over-year jump in the company's operating cash flow confirmed this. But after reporting weak margins of 0.7%, Amazon offered worst-than-expected guidance.
Despite projecting second-quarter revenue to growth in a range between 15% and 26%, Amazon is now expecting a loss in the range of $455 million and $55 million. Last year, the company earned $79 million. Immediately thereafter the stock plummeted 14%, falling to a low of $288 three days later. While the stock has since recovered 6% to get to that $308 range, Bezos is on notice that valuation matters again.
In fairness, Amazon has not changed. The company's first-quarter results didn't sway that drastically from what Bezos has produced in the past. But with everyone now skittish about these so-called momentum stocks, investors want some assurances the pot of gold they're expecting from this company is still realistic. The projected second-quarter loss raises questions about Amazon's focus.
Now, Bezos wants to take on Apple and Samsung (SSNLF) in smartphones, according to the Wall Street Journal, which cites an anonymous source. Allegedly the phone announcement will be made in July and the company will begin selling the device in September, the same expected timeframe for the release of Apple's iPhone 6.
But how much will that matter?