July 25, 2014 Last Updated 8:38 am

Amazon stock takes a beating as investors wonder where the profits will come from

But stock price has climbed with the market over the past three years as Amazon has concentrated on revenue and crushing the competition

The stock price of Amazon.com is set to open sharply down today as the investors digest the giant online retailer’s Q2 performance. Revenue grew 23 percent to $19.34 billion, what investors have come to expect, but losses grew, as well. In fact, the retailer warned investors that losses would be even worse in Q3, giving guidance that said the company would between $410 and $810 million.

Amazon-stock-3yrThat news sent a shiver through many investors and drove the stock down over 11 percent in after hours and pre-market trading. But the stock, as you can see in the chart at right, has had a nice climb over the past three years.

Investors have always given CEO Jeff Bezos plenty of leeway as the company has pursued growth and new product launches rather than profits. Amazon, for instance, constantly brags about its Kindle sales without giving the same kind of sales details that Apple does for the iPad each quarter. The days of “trust me” may be ending, however.

Amazon has built a business based on low margins, selling low to attract consumers, while also trying to create its own ecosystem for both tablets, and now smartphones. Like Apple, Amazon wants consumers to use their devices so they will also buy apps, books, and more from those devices – locking them into a system that may pay off down the road.

But Apple is making huge profits with the iPhone and iPad at the same time that its iTunes store sales are climbing. Amazon, in contrast, is gaining sales from both its devices and online store sales, without any of the corresponding profits being recorded on the ledger. Without more financial details, it is hard to point to the area that is causing the misalignment.

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