Online retailer beat fourth quarter earnings estimates, but that didn't stop shares of the company from taking a hard fall in the market.

Shares of the Seattle-based company Wednesday closed down 7.70 percent to $179.46.

The company's net income dropped to $177 million or 39 cents a share, from $416 million, or 91 cents a share in the year earlier period. Although earnings were squeezed primarily by weak profit margins from its Kindle line of e-readers and tablets, they beat analyst estimates of $91.6 million in net earnings, or 19 cents a share.

Shares tend to rise when the company beats earnings estimates. But ITG analyst Steve Weinstein said the downward market movement for Amazon was likely because the firm had a shaky outlook compared to the expectations the company had during the holiday season.   

In hindsight, the bar was set too high, Weinstein said in an interview.

Amazon recorded sales of $17.43 billion, up 35 percent from $12.95 billion in the year earlier period but below Wall Street targets of $18.2 billion.

Amazon conditions investors to expect strong sales, and those investors became disappointed once sales figures came out, BGC Partners analyst Colin Gillis told Bloomberg.

To miss on the top line, that's what breaks the momentum, Gillis said.

Things may get tougher for Amazon before they get better. Operating income for the first quarter is expected to be anywhere between a $200 million loss to a $100 million profit.  Although currency fluctuations and last year's acquisitions play a role in that outlook, much of it is based on the Kindle (primarily the Kindle Fire tablet), which was such a hot commodity in 2011 that it may be hard for the company to repeat its sales success, said Weinstein. 

Analysts believe the Fire, which costs $199, is currently losing money for Amazon, but the company wants to make up that lost profit in content sales. Other lower-end Kindle products have sold for as low as $79 following a drop in price in the fourth quarter.

But when will Amazon actually reap the benefits of the Kindle?

That's to be determined, Weinstein said.

This article has been updated to provide the share price at market close.