What Investors Are Saying About Amazon's Fire TV -- And Amazon

Apr 4 2014, 1:58pm CDT | by

What Investors Are Saying About Amazon's Fire TV -- And Amazon
Photo Credit: Forbes Apple

Making a big splashy announcement about a set-top box can get you lots of ink or maybe page views on the Internet.

But investors get to have their say, too, and the stock’s performance Wednesday, Thursday and, especially Friday, suggests they weren’t impressed that much by Amazon.com's new Fire TV set-top box.

The shares fell slightly on Wednesday after the $99 device was introduced in New York to pretty much positive reviews, at least in terms of the product’s features. The box lets you watch videos and play games.

On Thursday, the shares stumbled an additional $8.29, or 2.4% to $333.67. On Friday, the slump turned into more of a rout: The shares fell to as low as $315.61 before rallying back $321.74, down were down 3.7%.

The stock’s recent chart suggests strongly that a lot of investors are saying “Show me something that puts money in my pocket.”

The shares are down more than 19% this year alone and down more than 21% since reaching an intraday peak of $408.06 on Jan. 27.

The poor performance comes even as the Standard & Poor’s 500 Index is holding on to a 1.3% gain for the year. The Nasdaq Composite Index is off about 1%.

The slump has cut the value of CEO Jeff Bezos’ stake in the company from $35.8 billion to $27.8 billion. To put that loss in perspective, it’s 30 times the $250 million he spent buying the Washington Post.

Despite the slump into near-bear-market territory, Amazon shares are still selling at 538 times trailing 12-month earnings and 55 times projected 12-month earnings.

For the last few years, Amazon.com has been given a pass by investors, awed by the company’s fantastic revenue growth (an average 30.4% a year since 2004), and the enormous investments Amazon made in computerized warehousing infrastructure so that 24-hour delivery is the norm rather than the dream. The stock was up 44% in 2013 and 58% in 2013.

This year, skepticism has entered the Amazon story. Investors aren’t sure that Amazon’s strategy of plowing money into things where the payoff may take some time will always work and is worth paying up for.

The Fire TV is a case in point. While it has a built-in audience in the range of the 20-million or so subscribers to Amazon’s Amazon Prime service, it still comes to the market late. Yes, it streams in video from Hulu, Netflix and other services. But it also has to compete against Netflix, Apple Inc.’s Apple TV, Roku’s streaming service and Google’s Chromecast and other products.

And there’s the thorny problem of finding enough bandwidth on the Internet to be able to stream videos to users without interruption. Netflix, you will remember, can generate as much as 30% of all Internet in prime-time viewing hours all by itself.

So, making Fire TV a big contributor to profits will take time, and you’d be excused if you don’t see it as a huge revenue contributor.

To be sure, not all of Amazon’s sell-off is investor skepticism about the company specifically. Big-cap tech stocks have been hit this week and were selling off on Friday. Biotechnology stocks have been slapped around. The SPDR S&P Biotech exchange-traded fund was down nearly 5% Friday and 4% for the week. The ETF fell 7% in March.

Still, it may not be too much of a stretch to suggest that Amazon is starting to look like Apple, whose shares peaked at more than $700 in September 2012 and are now trading 24% below that level./>/>

Investors seem to want more from the company and aren’t sure what to expect. So, they seem prepared to walk away.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Wireless cooling: Magnets to keep your fridge cool
New York, July 29 (IANS) Magnets may soon act as wireless cooling agents for your refrigerators, laptops and other devices if a theory propounded by researchers at Massachusetts Institute of Technology in the US finds application.
 
 
Human-induced water vapour next climate threat
New York, July 29 (IANS) The rising levels of water vapour in the upper troposphere - a key amplifier of global warming - owing to greenhouse gases will intensify climate change impacts over the next decades, scientists said.
 
 
In changing times, women find losing virginity enjoyable
London, July 29 (IANS) Did you feel guilty after having sex for the first time? Take heart as young women today are actually "enjoying losing their virginity" compared to earlier days.
 
 
Cool flames in space to lead better engines on Earth
Washington, July 29 (IANS) A new space experiment can change the way humans travel. In a series of trials on board the International Space Station (ISS), researchers have discovered a type of cool-burning flames that could lead to cleaner, more efficient engines for cars.
 
 
 

Latest from the Network

Kazakh volleyballer becomes new Internet sensation
Almaty, July 29 (IANS) It took just a few days for Sabina Altynbekova, an under-19 female volleyball player from Kazakhstan, to hit stardom. After some performances during a youth tournament in Taipei last week, the...
Read more on Sport Balla
 
Indian para-swimmer Gayakwad misses out on bronze
Glasgow, July 29 (IANS) Indian para-swimmer Sharath Gayakwad missed out on the men's 200-metre individual medley SM8 bronze finishing fourth in the final of the event at the Tollcross Swimming Centre here in the...
Read more on Sport Balla
 
Lens returns to French Ligue 1
Paris, July 29 (IANS) Lens football club were promoted to the top flight, French Ligue 1, after successfully appealing a ban on financial grounds. Lens were banned from the Ligue 1 after failing to produce the...
Read more on Sport Balla
 
Sharadha fails to qualify for women's 100m finals
Glasgow, July 29 (IANS) Indian athlete Narayana Sharadha failed to qualify for the women's 100 metres final at the Commonwealth Games here. The 27-year-old Chennai-born finished sixth out of seven competitors in the...
Read more on Sport Balla
 
Cleanliness, punctuality Modi's mantra: Chinese daily
Beijing, July 29 (IANS) New vigour is sweeping through Indian government offices after Narendra Modi became the prime minister with ministers conducting surprise checks to see if bureaucrats are in their seats in time...
Read more on Politics Balla
 
MH17 investigators fail to reach crash site
Canberra, July 29 (IANS) Australian and Dutch investigators have failed for a third consecutive day to reach the MH17 crash site because of fierce fighting between Ukrainian troops and pro-Russian separatists,...
Read more on Politics Balla
 
Indian nurses now caught in Libyan conflict
New Delhi, July 29 (IANS) In a near replay of the incidents in Iraq, a large number of Indian nurses are caught amid spiralling violence in Libya, where rival militias seek to control the capital's international...
Read more on Politics Balla
 
Audrina Patridge splits from boyfriend
Audrina Patridge has split from her boyfriend. The reality TV star and Australian BMX rider Corey Bohan have split for good after five years of dating and though they have parted ways previously, insiders don't believe...
Read more on Celebrity Balla
 
Robert Downey Jr. excited to shop for baby
Robert Downey Jr. can't wait to go shopping for his baby daughter. The 49-year-old actor and wife Susan Levin will welcome a little girl into the world in November and he is planning to shower the latest edition to his...
Read more on Celebrity Balla
 
Joe Manganiello struggled to understand Sofia's Colombian family
Joe Manganiello found it difficult to understand Sofia Vergara's Colombian family when she introduced them over the weekend. The 'Modern Family' actress and the 'True Blood' star, who started dating earlier this month,...
Read more on Celebrity Balla