Amazon's Fire TV a success story, but lean profits have investors watching

Sales of Amazon's (NASDAQ: AMZN) Fire TV streaming device "significantly exceeded" the e-tail giant's sales forecast, the company said in its second-quarter earnings release. The news comes on a 23 percent jump in Amazon's net sales compared with the same quarter last year, from $15.7 billion to $19.34 billion. However, the company's operating and net losses remain a concern for investors.

"Fire TV sales have significantly exceeded our sales forecast and we are working hard to increase our manufacturing output," the company said in its earnings release. "Fire TV app selection has more than doubled since launch due to strong engagement from developers. Recent additions include MLB TV Premium, WWE Network, Animal Planet Live, and Grand Theft Auto."

The company listed overall media and electronics sales in its financials, but didn't break out Fire TV sales from its totals. Amazon's consolidated, worldwide media sales were $2.46 billion and electronics and merchandise rang in at $8.37 billion.

"Amazon Studios introduced Amazon's first two original children's series: Tumble Leaf and Creative Galaxy, exclusively to Prime Instant Video, and will add a third, Annedroids, tomorrow. The first six episodes of each show are available this summer, with additional episodes to follow later this year," Amazon's release continued. "In addition, Amazon Studios has greenlit five additional new pilots--the dramatic thriller Hysteria, dramatic comedy Really, one hour drama Hand of God, and comedies The Cosmopolitans and Red Oaks--as part of its third pilot season debuting next month on Amazon Instant Video."

Amazon saw an operating loss of $15 million--a reverse of a year ago, when it realized an operating income of $79 million. Its net loss came in at $126 million, a massive difference from its net loss in Q2 2013 of $7 million. Much of that difference is due to the soaring costs of shipping and its overseas expansion, an issue seen during Q1 2014 as well.

Still, investors are likely to continue pinning their hopes on Amazon's future.

"Amazon has for years been given something of a hall-pass on profits," a Wall Street Journal article Thursday morning said. "Unlike for many companies, investors are willing to forgive narrow profits or even losses on the belief that Amazon is simply plowing its ever-rising revenue back into hardware and services development."

For Q3, Amazon is forecasting continued growth in sales between $19.7 billion and $21.5 billion, or 15 to 26 percent year-over-year. According to the Wall Street Journal, the midpoint of that range is below analysts' expectations of around $20.83 billion. Amazon's projected loss for the third quarter is between $410 million and $810 million, due to expected stock-based compensation and "amortization of intangible assets."

Amazon stock fell in after-hours trading to $332.99 per share, down 7 percent from its Thursday closing price of $358.61.

For more:
- download the release from Amazon's investor page
- read this WSJ story
- USA Today has this story

Earnings summary: Sizing up pay TV earnings for the second quarter of 2014

Related articles:
Roku's Rosenberg: MVPDs threatened by connected TV devices
Amazon video streams triple while sales climb 23 percent, but profits remain thin