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Amazon's Q1 Results Explained In Six Simple Charts

Tyler Durden's picture




 

Moments ago Amazon reported its latest numbers which, as one would expect, emphasize the future and the profit potential one, two or more decades in the future, instead of highlighting the present and certainly the recent past. Because, neither the present nor the recent past are pretty.

In a nutshell: in Q1 Amazon posted a tiny beat on revenues, with Q1 sales printing at $19.7 billion compared to $19.4 billion estimated, however this is as good as it went. The problem as everyone knows for Amazon, are its margins. And in Q1 operating margins tumbled once again, this time to 0.7% (see chart below) which in turn resulted in operating income of only $146 million, well below the $200 million expected. And the cherry on top: AMZN guided to a Q2 operating loss between $455 million and $55 million, compared to the estimated profit of $210 million. Oh well, any decade now.

Here are Amazon's result in 6 simple charts.

First, total employees and worldwide revenue growth:

 

Quarterly operating and net income by quarter:

 

And Amazon LTM operating margin. It just printed at its all time joint low:

 

Quarterly operating margin:

 

A historical snapshot of just the first quarter across the past five years:

 

And the punchline: Q1 margin. No commentary necessary

 

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Thu, 04/24/2014 - 16:44 | 4692412 Joseph LaVorgna...
Joseph LaVorgna's Meteorologist's picture

The stock will up 10% tomorrow because Bezos rubbed his bald skull counter clockwise which is good luck. 

Thu, 04/24/2014 - 16:49 | 4692442 NotApplicable
NotApplicable's picture

Well, at least it looks like a controlled "soft-landing" on zero.

Thu, 04/24/2014 - 16:51 | 4692455 EscapeKey
EscapeKey's picture

Valuation - yes, ridiculous.

But it IS impressive that a company generating revenue of $74.5bn/yr STILL grows at above-20% levels.

 

Thu, 04/24/2014 - 17:24 | 4692582 Hero Protagonist
Hero Protagonist's picture

That reminds me of the company that was loosing money on every sale, but stated that they'd make up the shortfall on increasing volume. :)

Thu, 04/24/2014 - 18:02 | 4692719 James_Cole
James_Cole's picture

That reminds me of the company that was loosing money on every sale, but stated that they'd make up the shortfall on increasing volume. 

The Bezos school of economics?

Thu, 04/24/2014 - 21:13 | 4693443 Nassim
Nassim's picture

"loosing" is not the same thing as "losing"

Don't they teach you Americans how to spell?

Thu, 04/24/2014 - 17:33 | 4692629 obejoyful
obejoyful's picture

I could be a 200 billion company and grow 100% if I sold gold now at $1000.  After the start up phase, revenue means nothing compared to profits.   This generation has gone insane.

 

Thu, 04/24/2014 - 17:56 | 4692699 goBackToSleep
goBackToSleep's picture

yes, its the new wally world..... Just keep my tax free tp coming bitchez!

Thu, 04/24/2014 - 18:34 | 4692840 trader1
trader1's picture

commoditization of EVERYTHING.

before you know it, we may even commoditize the human experience.  

 

Thu, 04/24/2014 - 18:41 | 4692867 Hugh_Jorgan
Hugh_Jorgan's picture

Hmm, now I understand why Amazon Prime is going up from $79/yr to $99/yr.

Thu, 04/24/2014 - 16:53 | 4692458 Rainman
Rainman's picture

they'll make it up on volume ... of employees

Thu, 04/24/2014 - 16:59 | 4692483 Divided States ...
Divided States of America's picture

You mean drones

Thu, 04/24/2014 - 17:04 | 4692505 Xibalba
Thu, 04/24/2014 - 17:16 | 4692553 kchrisc
kchrisc's picture

Funny. as I was reading the article I was wondering how the propaganda media was going to spin it, You provided the answer.

Unicorns everywhere one looks.

Thu, 04/24/2014 - 17:25 | 4692591 max2205
max2205's picture

When the fuck do they start selling sex robots...yum

LOL

Thu, 04/24/2014 - 17:23 | 4692581 ebworthen
ebworthen's picture

And selling fudge.

Really good chocolate fudge, with nuts.

Thu, 04/24/2014 - 16:45 | 4692413 alien-IQ
alien-IQ's picture

must be flying on these "stellar" numbers...

Thu, 04/24/2014 - 16:45 | 4692418 JPM Hater001
JPM Hater001's picture

<---Winning on thin ice...

<---Winning on wheat thins...

Thu, 04/24/2014 - 16:46 | 4692424 NOTaREALmerican
NOTaREALmerican's picture

Looks like a buy to me,  as long as we apply the first law of bullshit:

X (amazon stocks in the this case) + bullshit  = $ ^ bullshit.

 

Thu, 04/24/2014 - 16:46 | 4692427 slaughterer
slaughterer's picture

Non-GAAP.  For the mother fucking win.  

Thu, 04/24/2014 - 16:50 | 4692451 NotApplicable
NotApplicable's picture

Given the amount of usage it gets, at some point they're gonna have to drop the "non" part, as it seems to be more and more accepted, every day.

Thu, 04/24/2014 - 17:04 | 4692509 ParkAveFlasher
ParkAveFlasher's picture

Yes, let's dilute accountability even more.  It's only words.

Thu, 04/24/2014 - 17:27 | 4692599 PT
PT's picture

GANAP?

Generally Accepted Non-Accounting Practices?

Thu, 04/24/2014 - 19:58 | 4693180 zyby
zyby's picture

GNAAP - Generally Non-Accepted Accounting Practices

fixed that for ya.

Thu, 04/24/2014 - 17:30 | 4692617 PT
PT's picture

GAMIUAYGAP?

Generally Accepted Make It Up As You Go Along Practices.

GALP?

Generally Accepted Lying Practices?

Thu, 04/24/2014 - 17:32 | 4692626 PT
PT's picture

FAAP?  CAAP?

Fraudster Accepted ...

Conman Accepted ...

 

Thu, 04/24/2014 - 17:51 | 4692683 holmes
holmes's picture

BMAAP

Bernie Madoff Approved Accounting Principles

Thu, 04/24/2014 - 16:46 | 4692428 Dr. Richard Head
Dr. Richard Head's picture

Soooooo........this is a sign of the recovery?

Thu, 04/24/2014 - 16:48 | 4692431 ParkAveFlasher
ParkAveFlasher's picture

I just tried to return a physical book purchased on Amazon.  They said, no need to return, and here's your refund.  What a country!  I love this company.  I do have Amazon Prime.  It's like an epic stream of free Siht for $99/year!

Thu, 04/24/2014 - 16:53 | 4692460 CrashisOptimistic
CrashisOptimistic's picture

Bought a keyboard for a Nexus 7.  They sent one for Nexus 11 or 13 or something.  Didn't fit the case.

I said I need to return and here's what you should have sent.  They sent the correct thing and said trash the old one.  No need to return.

I gave it to a neighborhood kid.  He Ebayed it.

Thu, 04/24/2014 - 17:06 | 4692514 ParkAveFlasher
ParkAveFlasher's picture

He rehypothecated it.

Thu, 04/24/2014 - 17:32 | 4692624 pods
pods's picture

And it is now supporting about $4 billion in Chinese construction loans.

pods

Thu, 04/24/2014 - 17:25 | 4692590 ebworthen
ebworthen's picture

Wow, talk about a slim profit margin!

Thu, 04/24/2014 - 21:44 | 4693517 rosiescenario
rosiescenario's picture

.....it was due to the weather....

Thu, 04/24/2014 - 23:27 | 4693816 StychoKiller
StychoKiller's picture

The shipping costs were more than the product was worth.

Thu, 04/24/2014 - 16:53 | 4692462 EscapeKey
EscapeKey's picture

Agreed. I love Amazon. But I wouldn't invest in them.

 

Thu, 04/24/2014 - 17:04 | 4692507 eucalyptus
eucalyptus's picture

I invested right before the crash @ 90. Got spooked and dumped at 60 and never went back in. :(

Thu, 04/24/2014 - 17:05 | 4692511 ParkAveFlasher
ParkAveFlasher's picture

Time for you to get Amazon Prime, and seek your revenge.

Thu, 04/24/2014 - 17:25 | 4692589 1stepcloser
1stepcloser's picture

Yep like I would bang ur avatar, but wouldn't marry it

Thu, 04/24/2014 - 17:59 | 4692707 williambanzai7
williambanzai7's picture

It is easy to fall into the trap of loving Amazon, as I did as well in the very beginning. Wow, everything is cheap!

However, when you consider the broader impact it has has had, not only on the creative industry, but the entire ecosystem of distribution, record shops, local booksellers, etc, a loss has been suffered by society. It may have been technologically inevitable, but Amazon certainly expedited and exacerbated the overall demise.

Once thriving small businesses that many people now miss, were replaced by a giant Wall Street financed behemoth. Most artists, writers and other creative types whose minuscule margins are not subsidized by hedge funds hate it.

TBTF

Thu, 04/24/2014 - 22:26 | 4693648 AdvancingTime
AdvancingTime's picture

It is hard to see why Amazon has any fans when you consider how they abuse and exploit the brick and mortar stores that line streets throughout America. These are the stores that employ our family members, support little league teams in the community, and add value to our lives. These stores build or lease space, buy supplies from the other local businesses, and pay both sales and real-estate taxes. While Amazon sends out the signal that their customers are smart, forward thinking, and upscale they exploit America and have an evil side, this is a side we should and must recognize.

Thu, 04/24/2014 - 23:29 | 4693820 StychoKiller
StychoKiller's picture

http://www.deviantart.com/

Go then, and purchase sumthin'...

Fri, 04/25/2014 - 08:22 | 4694589 Pee Wee
Pee Wee's picture

I forget, was the loss the overpriced music from shit musicians or the retail model from top to bottom?

Fri, 04/25/2014 - 12:17 | 4695634 PT
PT's picture

The stupid sheeples will willingly cut their own throats in pursuit of a "bargain".  I try to explain it to them and they simply do not care.

Funny thing.  Land premiums should be collapsing.  Nope.  Not happening.  Gee, I wonder why?

Over here, our govt/media propaganda machine blames the collapse of retailing on a 10% GST that doesn't apply to online purchases.  Well, that explains a 10% discount.  What about the other 50% ?  Good thing the sheeps are crap at maths.

Thu, 04/24/2014 - 16:53 | 4692465 NotApplicable
NotApplicable's picture

Hmm... this is good intel.

Thu, 04/24/2014 - 17:09 | 4692522 ParkAveFlasher
ParkAveFlasher's picture

Right? 

Now, what happens if you get no returns?  100% sell through, that's what.  And we all know that sell-through is what really counts to probey investors and audited financial statements and sales analyses.  So, just keep it, on us, and here's your money back. 

FREE SIHT ARMY STRIKES AGAIN!

Thu, 04/24/2014 - 17:04 | 4692503 eucalyptus
eucalyptus's picture

Yglesias was right - It's a charity run by investors for the benefit of consumers. I bought an xbox360 from them 2 years ago. They shipped me 2 units by charged me for 1 (300 a piece - only wanted 1). I called in to tell them I wanted to ship one back because they sent me too many. 

They paid for the shipping for me to mail it back - and then gave me a 300 credit for it, effectively giving me an xbox360 for free.

I also have an amazon prime student membership at the stupidly low student rate because all you need ia  .edu address, which my alumni one works. 

Ridiculous company. 

That said, it is damning that FB is worth more (or about the same) by mkt cap as amazon. One is completely useless - amazon provides much more consumer value. 

Thu, 04/24/2014 - 16:49 | 4692440 TheGreenManalishi
TheGreenManalishi's picture

?

Thu, 04/24/2014 - 16:51 | 4692450 SmilinJoeFizzion
SmilinJoeFizzion's picture

Starbucks just hit their estimates too, "EX-ITEMS"

 

I'd be looking pretty good on paper too EX ITEMS

 

You scratch the mortgage pmt, the food cost, fuel costs, car pmts off the books and I look pretty good too

 

This is such BULLSHIT

Thu, 04/24/2014 - 21:49 | 4693532 rosiescenario
rosiescenario's picture

...those would be the non-recurring, but quarterly, charges?

Fri, 04/25/2014 - 08:23 | 4694598 Pee Wee
Pee Wee's picture

One industry's bullshit is the same industry's bonus.

Thu, 04/24/2014 - 16:50 | 4692452 ZippyBananaPants
ZippyBananaPants's picture

They will probably be the largest company, market cap, at some point in the future, Bezos is nuts!

Thu, 04/24/2014 - 16:51 | 4692453 Bangin7GramRocks
Bangin7GramRocks's picture

It's because they treat the order pickers too well. A 30% pay cut for all happy warehouse workers should make wall street robots jizz all over the rich, mahogany floors.

Thu, 04/24/2014 - 16:53 | 4692459 Notsobadwlad
Notsobadwlad's picture

Even though the first chart is deceptively designed to make it look bad, employee growth is still well below revenue growth, so they should be getting economies of scale.

There is most likely something else contributing to the lower margin. Not going to read their 10Q because I do not really care.

Thu, 04/24/2014 - 16:53 | 4692466 thorgodofthunder
thorgodofthunder's picture

So why the extraordinarily high multiple of earnings then?  Can someone try and justify?

Thu, 04/24/2014 - 16:55 | 4692469 NotApplicable
NotApplicable's picture

Because... reasons!

duh

Thu, 04/24/2014 - 16:58 | 4692476 Ribeye
Ribeye's picture

something......something.....snow....something....brrrr.....

 

0.7%.........sufferin kittens, 

Thu, 04/24/2014 - 16:56 | 4692472 Racer
Racer's picture

"Earnings season" is a mere blip to show a sham semblance to reality.

*Normal sevice will resume shortly, apologies for the intrusions*

Thu, 04/24/2014 - 16:58 | 4692479 buzzsaw99
buzzsaw99's picture

bonus time again so soon?

Thu, 04/24/2014 - 17:07 | 4692489 chunkylover42
chunkylover42's picture

You clearly don't get it, Tyler.  AMZN is a margin expansion story.  First, contract the margins almost down to zero, then cut back CapEx and expand them all the way back to 2%.  Why, if they were to go from 0.1% to 2%, that would be a 20-fold increase in margins!

Now what kind of multiple would you put on that!?!?

Thu, 04/24/2014 - 17:08 | 4692523 Babaloo
Babaloo's picture

I think they should apply to the PUC and get licensed as a public utility.  They serve to depress prices throughout the economy and thus should be viewed as a public good.  Guarantee them a revenue stream and profits and let them expand to selling everything in the world.

Thu, 04/24/2014 - 17:10 | 4692527 Yen Cross
Yen Cross's picture

   .7% Q-1 margin? Ho Li Fuk!  

  BTFATH-BTFD-BUY BUY BUY > I'm Jimmy "tool time" Cramer and I endorse this statement.

Thu, 04/24/2014 - 17:14 | 4692545 virgilcaine
virgilcaine's picture

sells lots of stuff for little profit.

Thu, 04/24/2014 - 17:41 | 4692549 Seer
Seer's picture

Margin compression right on schedule, just like I'd been predicting... We'll only see more and more of this: Amazon won't have to sit all by itself.

Thu, 04/24/2014 - 17:21 | 4692575 wagthetails
wagthetails's picture

you just don't get it...Bezos is saving the work from capitalist pigs...he wants to run the world largest non-profit organization.  they'll never go out of business but just never make any money.  i can using there services...but owning their stock?  just make sure you lock in those profits. 

Thu, 04/24/2014 - 17:30 | 4692614 crash commando
crash commando's picture

.7% of 19.4 billion is $135,800,000.00.   Every three months.  I wouldn't signal the vultures just yet.

 

Thu, 04/24/2014 - 17:42 | 4692666 Seer
Seer's picture

I think that the point is that there's a downward trend happening, and that .7% is sloping even lower, so "every three months" cannot be a given.  I believe that it's said that he who panics first panics best?  Waiting too long and it's going to be a bit problematic...

Thu, 04/24/2014 - 17:35 | 4692635 MTAR
MTAR's picture

Now that's economic recovery!! LOL 

Thu, 04/24/2014 - 17:50 | 4692678 Bernoulli
Bernoulli's picture

How to....

...create a matrix like environment for the proles?

1) Supply Devices:

- Apple

2) Supply Movies:

- Netflix

3) Provide Stuff:

- Amazon

- Ebay

4) Provide Food & drinks:

- GrubHub

5) Make everybody feel "in control", "active" and "social":

- Google

- FB

- Twitter

- Linkedin

... and Bob's your uncle

So all of these companies are excessively overvalued. What does that tell us?

Somebody out there must believe (or want?) that we will all live a matrix-like life in the future.

 

Thu, 04/24/2014 - 18:10 | 4692741 starman
starman's picture

I on the other hand love Amazons! Tall ones with big titties!

Thu, 04/24/2014 - 18:29 | 4692820 1stepcloser
1stepcloser's picture

I love Anyonez...Anyonez with big titties

Thu, 04/24/2014 - 19:52 | 4693165 lotsoffun
lotsoffun's picture

starman - learn about real amazons.  they are tall. or short.  but it is 'tittie'.  sometimes the stupidity and lack of education amongst our american children stuns me.

western world has been reading the classics for almost 2,000 years.  but, then again, today we have kardashians, so why bother with the test of time.

 

Thu, 04/24/2014 - 18:24 | 4692776 virgilcaine
virgilcaine's picture

Sell when amzn has positive Earnings, until then the fantasy must go on. It's all about the 'future'.. Don't u know.

Thu, 04/24/2014 - 18:27 | 4692808 Quant Jockey
Quant Jockey's picture

As I listened I heared the sound of thousands of AMZN employees crying out for help!

Thu, 04/24/2014 - 18:28 | 4692816 SmilinJoeFizzion
SmilinJoeFizzion's picture

Just went RED after hours-  that call must be going well :)

Thu, 04/24/2014 - 19:23 | 4693036 Cthonic
Cthonic's picture

Me thinks collecting state sales taxes hasn't helped their bottom line much.  Next up, federal excise & vat.  Europeans put up with it, why not us?

Thu, 04/24/2014 - 19:23 | 4693043 BiteMeBO
BiteMeBO's picture

Time for a govt. bailout.  

Thu, 04/24/2014 - 19:36 | 4693098 AdvancingTime
AdvancingTime's picture

Don't be impressed with the hype and spin. As someone who is in business and works with numbers I'm unimpressed! Words like "evolving" are used to describe Amazon's business model, a better word might be undefined. Regardless Amazon rolls on. Pointing towards gaining synergy as they continue to buy companies, some unproven. The revenues from these companies add to their growth but still no profits exist. 

Does this growth mask a weakness at their core? If they are indeed a distribution company their stock should be trading at around 18 times earnings. When you look for a P/E ratio on Amazon you find NA because the company makes no money. Another key weakness is that new competition can now cheaply and easily replicate the most profitable parts of Amazon and cherry pick much of their future potential. The bigger they are, the harder they fall, it is only a question of time. More on this subject in the article below.

http://brucewilds.blogspot.com/2013/10/amazon-not-answer.html

Thu, 04/24/2014 - 20:33 | 4693311 justsayin2u
justsayin2u's picture

Back up the truck baby!  Gotta load up on AMZN - bad news is always good news in this market - right?

Thu, 04/24/2014 - 21:51 | 4693539 rosiescenario
rosiescenario's picture

Just wondering if UPS' fuel surcharge is hampering margin improvement.....of course that would be a one time, non-recurring event.....

Thu, 04/24/2014 - 22:00 | 4693561 rosiescenario
rosiescenario's picture

....just looked it up and it is now 7.5% which has to impact their 'prime' biz.

Thu, 04/24/2014 - 22:34 | 4693669 AdvancingTime
AdvancingTime's picture

In November of 2013 it was announced the USPS made a special deal with Amazon to do Sunday deliveries in two cities? This is wrong on several counts. The first and biggest reason is that the USPS is an extension of the US Government and a money losing one at that.

Another problem is this hurts all the smaller mom and pop businesses and brick and mortar stores in a community. This makes government an alliance to a company built on exploiting those who provide jobs to us on the most basic level. For more on this unholy alliance see the article below.

http://brucewilds.blogspot.com/2013/11/usps-and-amazon-another-unholy-al...

Fri, 04/25/2014 - 01:12 | 4693991 franciscopendergrass
franciscopendergrass's picture

The Q1 charts reminds me of my boner when staring at Joan Rivers

Fri, 04/25/2014 - 09:16 | 4694815 ProtectiveFather
ProtectiveFather's picture

The first chart is crap. It's misleading to juxtapose nominal numbers against rate of change. 

 

Amazon is not currently in the business of making money. It's in the business of making market share and Bezos is more than willing to go break-even to do it. You can argue about whether this strategy will pay off, but it makes no sense to criticise them for not doing something they're not trying to do.

Fri, 04/25/2014 - 10:42 | 4695148 css1971
css1971's picture

Wait... Do I hear 2000 calling? I do I do!

Fri, 04/25/2014 - 09:40 | 4694917 Turdy Brown
Turdy Brown's picture

I bought 2 gopeds (the best ones that go about 35 mph) for about $900 apeice from Amazon.  One had a few parts missing (maybe $10 worth at the most).  I called them up.  They gave me acredit for a whole goped!  Unbelievable!

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