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One of the number one reasons that traders lose money is because they cannot follow the most important rules. In fact, some novice traders do not even have any rules in place when trading. They are simply relying on luck or tips to make money in stocks. Here are three rules that every stock trader should adopt if they want to have a chance in this market.

1. The 10 Percent Rule.

The 10 percent rule was made famous by the legendary trader Jesse Livermore. He said that he would never take more than a 10 percent loss on any stock. Whenever he broke this rule and let his emotions get the best of him, he really suffered a bigger than expected loss both financially and mentally. A 10 percent loss keeps you in the game and allows you to fight another day. I cannot begin to tell you how many times I have seen one trade turn into a huge loss. This giant loss often hurts the trader involved and has been the cause of many blown up accounts.

2. Do Not Trade With Capital You Cannot Afford To Lose.

There is an old saying, scared money never makes any money. Whenever traders and investors trade with capital they cannot afford to lose it hinders their thinking. Trading comes with enough pressure already, but betting the rent or the mortgage on a stock simply affects the traders ability to read or follow that stock’s price movement correctly. A good rule is to also apply the 10 percent rule to position size. Never put more than 10 percent of your account into any one stock position. This will allow you to find other trading opportunities should they arrive. All of your capital will not be tied up in one stock. By keeping the position size to just 10 percent of your account you will not have too much of an emotional connection to any one trade. Keeping the stress of trading down is extremely important for your health and money.

3. Learn To Use And Read Charts.

While most of the people in the world will use fundamental analysis to trade (PE ratios, EPS, book value, etc), it is the charts and technical analysis that will show you the actual money flow of a stock. The bottom line, the trend is your friend except at the end. Reading charts of stocks will show you patterns and signal where the money is going and flowing. Remember, it is money flow that moves stock prices, not opinion from some talking head on the financial news channel. How many times have you seen a company report great earnings only to see the stock plummet and vice versa? Often, the chart will tell us this will happen before it does. Chart reading will also help traders to place stop losses and know where pattern breaks down or fails. Traders must understand that it is just as important to know where you are wrong on a trade as it is to know when you are correct. Charts do all of these things and more when a trader can read them. Every trader and investor should get educated in reading and understanding charts.

The post 3 Rules Every Stock Trader Should Follow appeared first on Wall Street Insanity.

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Apple was loaned $6.5 billion from investors through a bond sale earlier this week, just days after the company released an incredibly impressive earnings report. A company that’s able to sell 75 million iPhones in a single quarter and make a profit of $18 billion doesn’t seem like it would need to take on debt. The fact that it’s sitting on close to $200 billion in cash is another sign of the company’s lack of financial want.

Apple currently has about $34 billion worth of debt. That’s not exactly worrying when the total value of the firm is taken into account, but it is a significant number to consider when valuing the company. CEO Tim Cook has been able to use that investment to grow in recent years, but the question remains: How did Cupertino get into a situation where it needs to borrow to invest in the future?

Why Is Apple Going Into Debt?

Apple is borrowing for one reason and one reason only. The company is giving huge amounts of money back to shareholders every single year through the payment of a dividend and, more importantly, share repurchasing.

Though Apple spends most of its money in the United States, it pulls in more internationally than it does on American soil. A repatriation tax that the company has been complaining about for years means it can’t get that money back to the United States in order to pay for share repurchases and the like. With interest rates so low, Apple is currently paying about 3.5 percent annually for a 30-year debt.

Apple says its share repurchase program will return a total of $130 billion to its shareholders — a level it may not be able to meet with its U.S. holdings. Borrowing relieves that necessity and lets the company bring in a greater windfall should there be a better repatriation deal in place in the future. There are other tax benefits to taking on debt, but the lack of appetite for repatriation is the single most important factor.

What is certain is that Apple holds the majority of its cash outside of the United States and that the company would prefer to move a large part of it home, even at a significant tax loss. Whether a recent tax change volunteered by Barack Obama is good enough for Tim Cook remains to be seen.

Debt Prices Collapse All Over

The low price of borrowing that Apple is taking advantage of is affecting those borrowing from investors across the world. Countries across Europe currently have negative yields on some of their debt, meaning investors are actually paying to loan money to them.

Some companies, most notably Nestle, have actually seen this happen to their debt, and although that seems unlikely to happen at Cupertino, many are benefiting from ultra-low interest rates. Those prices may not be sustainable, however, and given the prominence of central banks in pricing debt, investors unused to the market should stay away.

Apple fans, however, shouldn’t worry too much about the company’s debt accumulation, at least not for now. While earnings continue to grow and the company’s sales are strong, there’s little enough harm in continuing to issue debt in order to buy shares. What is obviously terrible advice for an individual isn’t always the same for companies, especially when it comes to companies that can afford accountants like Apple’s.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted

The post Apple Dives Deeper Into Debt For Just One Reason appeared first on Wall Street Insanity.

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Apple released its earnings numbers for the three months through the end of last year on Tuesday afternoon, and took the market by storm. The company had an incredible quarter, and investors sent the firm’s shares surging toward record highs. Here’s a look at the six most insane numbers driving new confidence in Cupertino today.

$74.6 Billion In Sales

There’s no point in even trying to imagine that. Apple sold products worth close to $75 billion in three months. The company has never before sold close to that much, with the Christmas period last year bringing in less than $60 billion in sales.

$18.04 Billion In Profit

Also bafflingly difficult to grasp as an idea, this is the actual profit that Apple made in three months. To put it in clear context, this is enough money to buy almost 25 million iPhone 6 Pluses from the Apple website — carrier free, of course.

74.5 Million iPhones Sold

This is the amount that Apple actually sold during the three months. It’s close to the number of Xbox 360s that were sold during that product’s entire time on the shelf, and well ahead of the sales of the Nintendo Entertainment System, a pop culture icon.

1 billion iOS Devices Sold

Since the launch of the original iPhone seven years ago, Apple has managed to sell more than 1 billion iOS devices. This includes iPhones, iPads and the iPod touch, adding up to an average of 142 million devices per year. That number is still accelerating, according to those iPhone sales, so the company is likely to hit 2 billion a whole lot quicker, especially with the Apple Watch on the horizon.

$16.1 Billion Chinese Sales

Apple sold $16.1 billion worth of goods in China. It’s likely the most business any Western company has ever done in China in such a short period and it means a huge amount for the company, the country and the world in general. This means that Western goods can be successfully sold in China despite the country’s perceived antipathy toward American Capitalism.

China is a massively growing market, and one that Apple has been talking about exploiting for years. With the relative flub of the iPhone 5c in the past, it’s clear that the company is taking its role in the country more seriously and performing more effectively.

39.9 Percent Gross Margin

Here’s the real kicker. Many thought that Apple’s gross margin would decrease as a result of expensive new components, like the fingerprint reader and larger screen, included in the most recent iPhone. Not so, apparently. The iPhone is actually getting relatively less expensive to make.

That’s just about it for Apple numbers, but if the above facts don’t blow you away, here’s a couple of bonus figures. Apple is now sitting on $142 billion in cash reserves. That sum, in $100 bills, would weigh 1.288 tons and stand 88 miles high. That you can take to the bank.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted

The post The 6 Most Insane Stats From Apple’s Blowout Earnings appeared first on Wall Street Insanity.

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The fix is in. Microsoft released its earnings numbers yesterday and Windows revenue is down — down significantly. The company’s flagship product, with which it built a PC empire, appears to be in irreversible decline. The rise of mobile computing and severe changes in the way everyone, including businesses, deals with their IT decisions is driving a completely new reality at Microsoft.

Windows is dead, and unless Microsoft manages to do something to resurrect the software on smartphones and tablets, it’s never going to hit the highs it once did. Investors are running scared from the news. Apple fans are more than likely relishing the changes at Redmond.

Microsoft Reveals Death Of Windows

Here’s the key fact that the company had buried in its earnings report: Microsoft (NASDAQ:MSFT) is expecting that sales in commercial licensing, a section that covers sales of Windows and Office to business as well as server products, will be lower in the current quarter than they were in the same period last year. Microsoft’s server businesses are growing, but not enough to pull back the collapse in revenue from Windows.

The Windows Phone is not doing well, either. Tablets as a business segment aren’t all that healthy overall, and Microsoft’s contribution to the business is insubstantial. Windows is failing in enterprise, and there are lots of reasons to believe that this shift will continue in the years ahead.

Windows Doesn’t Look Close To Recovery

Windows is never again going to be bought en masse by enterprise customers as it has been for the last 20 years, and Microsoft is aware of that. There’s more than one operating system out there, and with Apple likely pushing into enterprise, there’s going to be real competition. For many companies, particularly those working with multiplatform third-party software, this is an ideal solution.

Microsoft is trying to keep attention on itself by bringing everything to the cloud, a strategy that may yet see the company explode in value. Windows might even become part of a total enterprise solution that the company offers to business. That is a concept that keeps coming up, and mirrors the reality of Office 365.

Windows may be a service in the future, but it’s never likely to be the major part of Microsoft’s bottom line that it once was. Microsoft has already decided to give the consumer version of its next operating system, Windows 10, away for free, an apology designed to buy brand capital for an operating system burdened with too many mistakes.

Windows is dead

That’s the new reality. Microsoft is giving Windows away in order to attract customers. Let that sink in for a minute.

Windows is set to become part of a full-service enterprise solution, along with everything else coming from Microsoft. Operating systems will, if not fragment, become competitive as enterprise Android use and platforming from companies like RedHat and VMWare drive compatibility with more diverse Linux systems.

Windows is dead, and Microsoft is going to suffer heavily in the short term as a result. In the long term, it should be obvious to any listening to the proclamations of Microsoft CEO Satya Nadella that it doesn’t matter. Microsoft isn’t in the operating system business anymore. It offers enterprise services. Unfortunately, investors are simply not impressed with that particular platitude right now.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted

The post Do Microsoft’s Earnings Mean The End Of Windows? appeared first on Wall Street Insanity.

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The question isn’t how to kill a giant — it’s how to know when the behemoth is dying. That’s the skill needed to win big in the stock market, and it’s a skill only a select few manage to cultivate. Google (NASDAQ: GOOG) is one of the biggest behemoths of them all, so figuring out when it’s in decline is a big deal. On the back of failure after failure, it’s time to take a long, hard look at the firm’s foundations.

Google has had a bad run in the last year after an almost spotless growth record since going public. The company’s stock has dropped 9 percent of its value in the last 12 months, and, considering the way it’s valued right now, it seems like it could lose a whole lot more in the quarters ahead. The company’s earnings are set for release on Thursday, Jan. 29. Heading into that date, it’s time to take a look at how Google is valued and why things have gotten so bad for investors.

Failure Haunts Google

There have been several real failures that should cause investors to question the Google growth formula. Whether or not the company can rectify them and undo the harm they’ve done will mark Google’s management as either successes or failures. Here’s a rundown of the big mistakes that have occurred in the past year or two.

Expenses are becoming a problem at the company as it invests heavily in projects like Google Glass, Project Ara and Google Fiber that are unlikely to reap any sort of return for the company in the medium term. Long-term benefits are all very well and good, and management is sure to claim huge achievements as the result of their foresight, but it’s not good practice to draw those lines in a portfolio.

Advertising revenue, particularly that from search, dominates the Google accounts. Unfortunately, the company has not been able to pick up the pace on mobile, while paid clicks on Desktop have been a huge disappointment, slowing more quickly than expected.

Google Glass is a goner. All of the time, money and news coverage that went into Google Glass appears to have been for naught. The company will never likely never reap a penny from the project and developers aren’t pleased with its apparent abandonment.

Motorola had to be sold off after years of nothing, a serious strategic error that will haunt top Google management for quite a while.

Google Plus is deader than Glass. Nobody really cares about the network, and the massive departure from Facebook just isn’t going to happen.

Innovation is missing at Google and its attempts are alienating previous fans of the company. Glass alienated developers, Enhanced Campaigns angered advertisers and Android Lollipop failed to please anybody.

Why So Serious?

Google is a high-valuation company, and failures like these have mounted up. Investors are questioning the company’s management, and with a P/E of 27, they should do so persistently and aggressively. From a range of perspectives, Google is overvalued, and next week’s earnings will test the mettle of the firm’s investors.

What does a P/E ratio of 27 represent, anyway? It’s a number that approximates the growth expected from Google in the coming years. This is a complex equation that often has nothing to do with fundamentals, but some comparisons may make that particular figure more starkly defined. Apple trades at a P/E of 17, Microsoft trades at a P/E of 18, Yahoo trades at 6, and Samsung Electronics trades at 8.

Why does Google deserve that premium number? The answer, at least according to traders over the last year, is that it doesn’t. The company’s share price is no longer being inflated, while its earnings continue to grow much more slowly than anticipated. That will deflate the company’s P/E over time should the trend continue.

A stream of failures is not a good sign from an innovation lead company. Google’s ad business appears to be maturing, and it’s got no other growth sectors to pick up the slack. None of its major side businesses are ever likely to yield returns and investors are getting used to the score.

Google’s not going to disappear, but it will slow down. Next Thursday’s earnings report is a good place to start looking for signs of cracks in that colorful facade.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

The post Google Might Be Overvalued As Failures Build appeared first on Wall Street Insanity.

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For nearly a century electronics hobbyists have turned to RadioShack for all their favorite gizmos and gadgets. The days of Tandy computers, walkie-talkies and tape recorders have long passed, and what was once the favorite shopping spot for nerds, geeks and whiz kids may soon be nothing more than a memory, a chapter in technological history.

RadioShack (NYSE:RSH) released its second-quarter earnings report Sept. 11, confirming the struggling company saw yet another quarter of profit losses and fallen revenue. At just $673.8 million, RadioShack’s second-quarter sales were down from $861.4 during the same period last year. Store sales during the same period fell 20 percent, while the company experienced a $119.4 million loss in net earnings – more than double the $51.1 million loss reported in the second quarter last year, or a $1.35 per-share loss.

“For the past 18 months we have been working hard on our turnaround plan. While we are advancing on many fronts, we may need additional capital in order to complete our work,” RadioShack CEO Joseph Magnacca said in a statement Thursday morning. “As a result, we are actively exploring options for overhauling our balance sheet and are in advanced discussions with a number of parties.”

RadioShack’s finances have been in such a deplorable state, in fact, that the company was unable to proceed with plans to close 1,100 poorly-performing stores when it could not secure financing to pay severance, dispose of inventory and break leases. Instead, it scaled those plans back and closed just 200 stores. Now, RadioShack is seeking a lifeline – capital that would allow the company to restructure its debt and cut additional costs by ridding itself of more failing stores.

Search For Cash

RadioShack shares rose 16 percent in premarket trade Sept. 11 after the struggling electronics retailer said it was in advanced discussions with a number of parties, including UBS AG and investment firm Standard General LP, which already owns 10 percent of RadioShack, over options to overhaul its balance books. According to RadioShack, those options could include debt restructuring, store consolidations and other measures that would significantly reduce costs.

The details of a recapitalization have yet to be finalized, and we are reviewing several alternatives, some of which would require consent from our lenders,” Magnacca said.

According to a Bloomberg source, money invested would be used to refinance debt outstanding under a $535 million asset-backed revolving credit line from General Electric Co. unit GE Capital. RadioShack says it is also in talks with third parties and its financial stakeholders about other options, including a possible sale. Although some form of recapitalization is the company’s most likely and preferable course of action, RadioShack is unable to guarantee it will “be able to strike such a deal.”

Road To Bankruptcy

If RadioShack is unable to find a solution to its monetary woes outside of bankruptcy court, the 93-year-old company may be forced to file for Chapter 11 bankruptcy protection. The struggling electronics retailer filed a document with the SEC Sept. 11, confirming bankruptcy may be on its horizon.

If acceptable terms of a sale or partnership or out-of court restructuring cannot be accomplished, we may not have enough cash and working capital to fund our operations beyond the very near term, which raises substantial doubt about our ability to continue as a going concern,” RadioShack claimed in the SEC filing. “As a result, we may be required to seek to implement an in-court proceeding under Chapter 11 of the United States Bankruptcy Code.”

While a Chapter 11 bankruptcy filing would allow RadioShack to restructure its debt with its creditors, the company offered no assurance that even such a drastic step will be successful. Should restructuring be unachievable, RadioShack will likely be required to liquidate under Chapter 7 bankruptcy, according to the SEC filing. Such measures would effectively serve as the final nail in the company’s coffin and require it sell off its assets.

RadioShack runs more than 4,400 company-operated stores in the United States and Mexico, as well as more than 1,200 dealer stores in 25 countries. It employs about 27,000 people.

The post RadioShack Seeks Cash… Is Bankruptcy On The Horizon? appeared first on Wall Street Insanity.

Twitch

Gaming on an Android smartphone may not be the same as using an Xbox 360, and the games on Google Chrome certainly leave a lot to be desired. Google (NASDAQ:GOOG) has been rumored to be going into gaming every couple of months for the last five years. The company has already implanted itself at the center of the gaming experience however, unbeknownst to the most ardent of players out there.

Google has apparently closed its acquisition of Twitch, the video site specializing in video game streaming. The buy, which will cost the Mountain View company about $1 billion, puts YouTube (which is to have Twitch integrated into it) at the forefront of gaming media, and that’s the business that Google should be trying to capture. Google has never been about selling software, it’s always given it away for free in order to pull eyes into advertising.

Google Stays Away From Hardware

Google is not going to release a video games console any time soon and looking at the performance of Sony and Microsoft in recent years, the company is probably making the right decision. The video games market is going to absolutely explode in the coming years, there’s no doubt about it. Which form that explosion will take is, however, much more difficult to predict.

Google isn’t going to mess around with games that could fail completely, it’s not going to mess around with consoles, which have to make a big loss before they make any money. The company is all about keeping its margins high and staying away from businesses that don’t augment its control of the online ad world. Consoles won’t do anything for its revenue. Twitch, however, is a perfect compliment.

Google Aims At The Core Of Gaming

Gaming is big business, and Google is going to attack everything that surrounds it rather than selling games itself. The company already controls a huge chunk of games advertising and, with the rise of the Let’s Play and other video streaming content, the company’s control of that part of the industry is going to head upwards, and Google is the only company making any effort to really harness the energy.

Twitch and YouTube are at the center of the way that gaming is perceived. They are the places that gaming fosters a community and they are the places that advertising dollars are going to flow in the next few years. Given Google’s ability to create a space that contains a niche audience, the price of that advertising is likely to be high, and the overhead is likely to be low.

Google is, despite the lack of a Googolplex console, betting big on gaming. Its $1 billion Twitch acquisition proves that. The company is also likely to be one of the biggest beneficiaries of the industry in the year ahead, and it’s almost certain that its gaming ads business will generate more in profit than Microsoft (NASDAQ:MSFT) has ever managed from the Xbox division that weighs so heavily on its results.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

The post Google Is Going To Rule The Gaming World This Decade appeared first on Wall Street Insanity.

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Microsoft Corporation (NASDAQ:MSFT) has made a huge number of mistakes in recent years, and the company has spent a huge amount of money in areas it simply did not need to. Its future is by no means in question after problems with Windows 8, but it is on the back foot and attacked from all sides. Luckily for the company, Windows 9 is on the way and it’s bound to keep Apple out of business.

Apple Inc. (NASDAQ:AAPL) announced a deal earlier this month that will see enterprise software expert IBM sell Apple devices with enterprise software packages installed. The deal was heralded by some as the breakthrough into enterprise that Apple has been threatening for years, but it’s not that simple. Apple appears to be doing little other than offering tacit support to IBM. Microsoft, on the other hand, is developing a killer enterprise system that will keep Cupertino out of the market, or, at the very least, relegate Apple to a minor enterprise role.

Microsoft Concentrates On Enterprise

Almost everything that Microsoft has done really wrong in the last decade has been aimed at consumers. The company’s Xbox division is hemorrhaging money, the Surface RT was a mess, and Windows 8 with its flat colorful design, messed with the workflow of millions of the company’s core customers. The Zune is dead, and the era of Ballmer is over. Microsoft has always done its best work in business services. Now it’s time to own up to the fact, and own the future of that market.

Windows 9 is, if CEO Satya Nadella’s public comments can be trusted, not going to be an incredibly innovative OS in form or function. It’s going to do what Windows 8 should have done. The Start menu and desktop will be the default mode of navigation on a laptop or terminal. The metro tile menu will be default on a tablet. Windows 9 will know what kind of form it’s operating on and change to suit. That solves the major problem that people had with Windows 8, an interface issue blown into a fatal flow.

On the other hand, Windows 9 will be a conduit for everything that Microsoft is selling to business, from its cloud applications to its office suite to the very thin client infrastructure that people work on. Windows 9 is going to be at the center of all of those offerings, and the company’s services are going to work best on a Windows 9 phone or on a Windows 9 tablet.

Microsoft may or may not move hardware in this way, but it’s not about the hardware. It’s about enterprise software. Microsoft does an awful job at creating it and IT managers have constant implementation headaches, but their offerings are more complete and in the end, for most people they’re better than anything else out there. Apple is a different story.

Windows 9 Shuts Apple Enterprise Down

Apple appears to be making a halfhearted attempt to enter the enterprise game, and it may release an iPad Pro soon to show just how half-hearted it can be. The company offers nothing to enterprise and can at best offer the kind of surface-level apps that IBM is building to small and medium enterprises.

In order to get into the enterprise IT market, you need a solution that nobody else is offering. For Microsoft Windows 9 and the cloud of services that surrounds it, the completeness of the offering sells itself. Apple has nothing of the sort, and those hoping to run a large company on Apple enterprise technology should understand the height of a wall that Microsoft is building with Windows 9.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

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A hedge fund battle that has been raging for more than a year will once again rear its head this afternoon, Monday July 28, after the market closes. Herbalife Ltd. (NYSE:HLF), purveyor of herbal diet supplements, will reveal its numbers for the three months through June this afternoon, and investors will be crowding around to watch the numbers. Bill Ackman and Carl Icahn, two of Wall Street’s best known hedge fund managers, are battling over the future of the company, and today’s earnings may show off weakness on one side or the other.

Bill Ackman, who runs a hedge fund calls Pershing Square, is betting against Herbalife. He reckons that the company is a pyramid scheme, and he’s bet a lot of money that he can prove it. Carl Icahn seems to like Herbalife’s business and his is the winning bet at the moment. As Bill Ackman attempts to demonstrate the problems with the Herbalife model, the hedge fund manager will hope that the bad publicity will have had some effect on the company’s earnings.

Hedge Fund Battle Rages Around Herbalife

An incredible anticlimax last week has left the Bill Ackman bet against Herbalife reeling. He announced last Monday that he had information, sourced from an ongoing widescale investigation into the company, which would massively undermine its value and show it to be a pyramid scheme. Shares fell significantly in value on the promise, but sprang back strongly after the hedge fund manager revealed what he had. The market seemed to agree that it was more of the same old talk, and little that could harm the company.

Ackman began his bet against Herbalife in December of 2012. Since he first put money against the company it has performed relatively well in earnings, benefiting from the booming consumer economy and an increasingly health conscious America. The company’s shares have seen their ups and downs in the period, but now sit at more than $67 a unit. That’s a lot higher than Bill Ackman shorted the company at.

Right now Bill Ackman is likely losing a large amount of money on the back of his bet on Herbalife. Carl Icahn, on the other hand, is collecting dividends as his junior rival tries to convince the Federal Trade Commission to go after Herbalife for the way it treats customers. Ackman is used to long short campaigns, however, and he may not take his defeat at last week’s presentation as proof that he’s lost. Tonight’s earnings report may change his opinion.

Earnings Hit Ackman Hard

Tonight’s earnings report will show whether or not the brand damage that Bill Ackman has been trying to do to Herbalife on the capital markets has had any effect on the consumer level. If the company’s earnings beat the expectations of the market and the shares pop, Bill Ackman may soon be forced out of his position by revolting clients.

If, however, the company had a poor June quarter, there’s likely to be some reinforcement of confidence for Ackman. Herbalife may be the biggest bet he’ll ever make, and his reputation is really and truly on the line. Earnings numbers are not at the center of this battle, but that doesn’t mean that either side would reject a win this afternoon.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

The post Herbalife Earnings Showcase Hedge Fund Fight appeared first on Wall Street Insanity.

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Amazon (NASDAQ:AMZN) is set to send out the first units of its Fire Phone today, while the company’s shareholders are questioning the future of the business. Amazon has never been exactly profitable, but the company’s most recent quarterly loss (revealed on Thursday afternoon) appears to have shocked the company’s investors. The advent of the Fire Phone, and advertising for the Fire Phone, could mean more losses in the quarter ahead.

After the market closed on Thursday, Amazon showed off its earnings numbers for the three months through June. The company actually lost more than $120 million in the three months after taking in $19.34 billion in revenue. Amazon doesn’t have the margins of an Internet company, and it doesn’t have the margins of a retailer. The company looks a lot like an industrial steel manufacturer from its pure numbers.

Amazon Can’t Make A Profit

The key at Amazon is overwhelming investment. This is what the company’s management, led by CEO Jeff Bezos, says about its current period of zero profit. The company is doing everything it can to expand revenue. It’s not trying to inflate its profits by any significant margin, it’s simply trying to lay the groundwork for a future in which it controls a decent swathe of the entire Internet.

The Fire Phone isn’t helping matters. The enormous amount that Amazon has spent on it and other technologies in recent quarters is eating into profits, and bringing huge losses.

Amazon probably won’t post a loss for the full year, but its profit won’t be anything like a good margin, and the company isn’t even close to the stability required to pay out a dividend. Its share price is growing higher and higher, barring the misfortune that preys on the stock on this morning’s market.

Fire Phone Setbacks Plague Amazon

Yesterday’s earnings report, which showed off earnings much lower than expected, was a second blow to the Amazon Fire Phone before it made it to its official release. The device was already reviewed by tech journalists this week, and its features are apparently less than impressive. With investors fleeing from Amazon shares, the time might soon arrive for a reckoning of the company’s future, and it may not involve the Fire Phone.

Today’s share setback probably won’t bring out the activists, as investors are still likely following the lead of Mr. Bezos who has basically achieved what he’s been promising all along. Amazon’s yearly revenue is expected to hit $90.8 billion this year. The company’s major tech rivals Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG), are expected to bring in $180 billion and $78.8 billion respectively in their current fiscal years.

Both of those companies may make a profit now, but as Amazon pivots toward margin expansion, which is expected sometime in the next decade, the company may find it has a lot of room to grow in a very short period. The risks are enormous however, as any investor holding the stock this morning is aware.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

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