Ahead of the Bell: Amazon 2Q revenue likely strong

AP News
Posted: Jul 26, 2012 6:31 AM
Ahead of the Bell: Amazon 2Q revenue likely strong

NEW YORK (AP) — Amazon.com Inc. is expected to report sharply higher revenue for the second quarter, though investments in new distribution facilities may weigh on the online retailer.

The report comes after the market closes on Thursday.

As the world's largest online retailer, Amazon's results can provide a glimpse into the mood of consumers, which power 70 percent of all growth in the U.S. economy. In general, online retailers have been weathering the shaky economy better than their brick-and-mortar counterparts, as eBay Inc.'s strong second-quarter results showed last week.

Because Amazon's revenue has been strong, investors are likely to focus on the company's profit margins and bottom line. The company has been reinvesting a lot of its earnings to build up a distribution network so that it can better grow its business over the long term.

The effects of the weak economy in Europe on sales will also be a focus.

In addition, looming sales tax requirements, a slowdown in Kindle Fire shipments ahead of the launch of a new version and rising costs for acquiring content should "warrant some caution" regarding Amazon's results, said Baird analyst Colin Sebastian.

Amazon.com Inc. only collects sales tax from residents of Kentucky, Nebraska, New York, North Dakota, Texas and Washington and has said that it wants Congress, not individual states, to resolve the issue of whether it is required to do so.