Stocks of Amazon.com (NASDAQ:AMZN) Down by 16% – Are Jeff’s Strategies Backfiring?

The chief executive officer of Amazon.com (NASDAQ:AMZN), Jeff Bezos, in a recent meeting with Business Insider’s explained the reasons as to why the stocks of the company keep on rising despite the fact that the company is delivering almost no profits. Instead of giving out dividends, Amazon.com (NASDAQ:AMZN) is making new assets and expanding its businesses, and the investors of the company are fine with this strategy. The CEO further said that you need to do experiments if you want to make bold bets. He further said that you cannot predict the end result of an experiment at the start of it.

The company, however, saw a decrease of almost 18 percent in its stock prices during the year 2014.

Amazon.com (NASDAQ:AMZN), for most of its existence, has delivered almost zero profits. The revenues of the company increased to $74.45 billion from a previous figure of $14.8 billion from the years 2007 – 2013. However, the profits decreased to $273 million from a previous figure of $436 million. It is important to note here that the company delivered profits in millions whereas the revenues were recorded to be in billions. The stocks of the company, on the other hand, kept on rising because the investors were not concerned about the decreasing profit margins. Due to Jeff’s strategies, the company has now become the biggest U.S. online retail company.

In 2014, however, the investors of the company turned on it when the company announced on December 1, 2014 that it would issue unsecured debts. Moody’s, a market analyst firm, changed Amazon.com’s (NASDAQ:AMZN) outlook to a negative, mainly because of a shift in investors’ sentiment. There are 2 reasons for this shift.

The first is that the growth in revenues has slowed down over the years. The growth rate was recorded to be at 40 percent during the year 2010; however, in 2012, the rate dropped to 22 percent. The company expects a growth rate of around 16 to 20 percent for the current fiscal year.

The second reason for investor’s anger is that the company’s investments are not returning any benefits. One of its most prominent failures is the Fire phone, which has received extreme criticism. The company took a loss of $170 million in its write down in the month of October, when the inventory of Amazon.com (NASDAQ:AMZN) piled up and the company decided to cut down the price from $200 to $0.99. The failure of Fire phone, however, does not reflect on the strategies of Jeff, for big bets come with big failures.

Coming to the current stock prices of Amazon.com (NASDAQ:AMZN), the company, on the last trading day of December 3, 2014, started its stocks at a price of $325.73 and closed at a much reduced price of $316.50. The intraday range for company’s stocks was recorded to be from $314.36 to $326.77. As far as the market capitalization of Amazon is concerned, the figures stand at $150.94 billion.