Amazon Soars To New All Time High After Smashing Expectations

Tyler Durden's picture

After two consecutive quarters of disappointing earnings reports (which however failed to keep the stock down), AMZN is back to its beating ways, reporting both revenue and EPS which blew away expectations. In the first quarter, Amazon reported earnings of $724 million or $1.48 per share, a 41% increase in quaraterly profit, and some 40 cents above the consensus estimate of $1.08, on net sales of $35.71 Billion, also higher than the estimate of $35.3 Billion, and up from $19.2 billion.

This was toward the top end of the company's guidance from a quarter ago, which saw sales rising as saw earnings rising as $35.75BN. The company's closely watched operating income came at $1.01 billion, beating estimates of $936.2 million.

The closely followed AWS segment reported net sales of $3.66 billion, also beating estimates of $3.63 billion, a Y/Y growth of +43%; However AMZN reported AWS operating income of $890 million, which was a modest miss to the $1.1 billion expected. AWS margin in Q1 was 24.3%, fractionally higher than the 23.6% reported a year ago.

Putting AWS in context, whereas AMZN's total operating income was $1 billion in Q1, AWS $890 million of this. The division has been facing tougher competition from both Microsoft and Google, prompting some concerns about whether the growth can continue on pace, especially amid price wars.

Looking forward, AMZN sees the following revenue and operating income:

  • Net sales are expected to be between $35.25 billion and $37.75 billion, or to grow between 16% and 24% compared with second quarter 2016. This guidance anticipates an unfavorable impact of approximately $720 million or 240 basis points from foreign exchange rates. Wall Street expected $36.9 billion
  • Operating income is expected to be between $425 million and $1.075 billion, compared with $1.3 billion in second quarter 2016. Wall Street consensus was looking for $1.49 billion.

Jeff Bezos was as usual optimistic:

“Our Prime team’s customer obsession kept them busy in 2016,” said Jeff Bezos, Amazon founder and CEO. “Prime members can now choose from over 50 million items with free two-day shipping — up 73% since 2015. Prime Video is now available in more than 200 countries and territories. Prime Now added 18 new cities, which means millions more members now get one and two hour delivery. New benefits were also added to the list, like Prime Reading, Audible Channels for Prime, Twitch Prime and more. And customers noticed — tens of millions of new paid members joined the program in just this past year.”

As a reminder, a big part of AMZN's spending is coming in international markets like Mexico and India, where the company is building out its Prime offerings and competing against heavily entrenched incumbents. As the WSJ notes, Flipkart, Amazon’s main competitor in India, just drew another big round of funding totaling $1.4 billion, including from U.S. rival eBay Inc. Last week, Amazon said it would be expanding its retail footprint to Australia.

The international business has been stuck in the red in recent quarters. That remained the case in the first quarter, as the division reported an operating loss of $481 million. Sales increased to $11.1 billion, from $9.57 billion a year ago.

As the journal also adds, the retail giant has also started laying the groundwork for its own shipping business to add capacity for itself. In the first quarter, Amazon said it is building its first air hub in Kentucky and is also planning to add airfreight capacity for Chinese customers. The company is leasing 40 planes and has more than 4,000 dedicated truck trailer hitches as it aims to move more of its goods itself, and has rolled out delivery in as little as an hour to more than 40 cities. But that fast shipping likely contributed to the company’s shipping costs rising 34% in the first quarter to $4.38 billion.

Despite the company's generous spending ways, analysts have said that high margin streams of revenue like those from its advertising, subscription and credit card businesses are expected to continue to grow and help offset higher spending.

Finally, for all the concerns about AMZN's cash burn, the company reported LTM Free Cash Flow in Q1 of just over $10 billion.

After rebounding in Q4, AMZN's operating margin posted a modest decline to 2.8%

Also notable, as of March 31, Amazon employed some 351,000 mostly part-time workers.

Finally, after a significant rise in the company's LTM operating margin in the past two years, it appears to have plateaued once again.

That however does not bother shareholders, who have sent AMZN to fresh all time highs, above $950, which means Jeff Bezos is now a little over $50 away from being the world's richest man.

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takeaction's picture

Amazon Prime should include health care...

.

On a side note that you will not hear nationally...Here in Portland, they are cancelling one of our parades this year due to the threats of violence towards Republicans/Trump supporters.  Can you believe they cave in like this? We just roll over every time...

http://www.kptv.com/story/35246091/annual-82nd-avenue-of-roses-parade-ca...

TheFreeLance's picture

Certainly a drug benefit, eyeglasses. Why not? 

American Psycho's picture

BUY THE FUCKING RIP!!!  What could go wrong?

auricle's picture

well played wall street, right before tomorrow's .5% GDP print. 

yogibear's picture

Hey David Einhorn,

LOL, The Bulls are uriniating on you!

Your going to learn a hard lesson with your BIG MOUTH!

GUS100CORRINA's picture

AMAZON and many others are making up the RULES as they go along. 

What we have here is an example of relativism applied to financial metrics and company performance. Your turth is your truth and my truth is my truth and P/Es over 150 is the new normal.

With P/E of 150, we are looking at a DOW of 100,000!!!

But hey, why not? Below are METRICS for AMAZON.

P/E- 185.65

Forward P/E - 73.14 ??????

PEG - 6.41

P/S - 3.19

P/B - 22.49

P/C - 16.67

P/FCF - 44.63

Quick Ratio 0.8

Debt/Eq - 0.61

LT Debt/Eq - 0.4

 

Zero_Ledge's picture

"Tadpoles!  Tadpoles is a winner."

 

Newbie lurker's picture

I am very interested in this but not savvy with this financial metric stuff.... Can someone splain me?

HowdyDoody's picture

Loss is the new profit. Debt is the new wealth.

Pass the parcel (bomb).

https://www.youtube.com/watch?v=WLx3h-lOC2I

HalinCA's picture

It's the cloud .... Amazon has decomposed all the software features needed to create business apps and charges clients by the feature/use.  A business no longer needs to support its own hardware/network infrastructure - Amazon does all that for you!

The IT world will implode over this.

The first State government to figure this out and move to the cloud will be able to get rid of 80% of their IT department.  

No more server farms, or computer room chiller plant, no more operating system or Oracle database license fees ....

I have no idea how the legacy vedors like Dell/Microsoft/Oracle are going to stop this ... but sure as Hell they will try.

thesonandheir's picture

Bezos has pissed all over Trump and still continues to do so.

 

Is Trump a fucking idiot or what to let this man continually abuse him and then become the 2nd richest man in th world? 

giovanni_f's picture

Two questions:
1. What will the growth prospects be after the brick & mortars' businesses will have been savaged?
2. How high is the dividend? /s

HalinCA's picture

Selling stuff is secondary to why their stock is so high ... do some simple research ... start here

https://seekingalpha.com/article/3099716-amazon-10-implications-of-a-pro...

Rainman's picture

Pay no attention to the 187 p/e

giovanni_f's picture

they don't - permanent growth will bail them canny investors out.

TheSilentMajority's picture

190 p/e is a bargain for this pig!

barysenter's picture

fwd smoking cinder!

flea's picture

Stock prices have reached what looks like a permanently high plateau.

enfield0916's picture

Amazon - a jungle where you can buy anything from cow dung cakes to Ferrari parts.

Shitonya Serfs's picture

Can't buy confederate flags, guns, and ammo. Can buy rainbow flags and ISIS flags, though, same

Trucker Glock's picture

How did this happen?  I stopped buying through Amazon!

aloha_snakbar's picture

Jeff Bozos... the richest midget in the UNIVERSE...

ChemtrailPilot's picture

Hold up, so ex-AWS they only made like $100 million in operating income on $35 billion in sales? How is this shit not a penny stock again?

JedClampIt's picture

And subtract Prime membership revenues and they are losing money on every sale. Guess they make it up on volume

truthalwayswinsout's picture

Never seen such bullshit in my life. Amazon cannot maintain the ability of resellers to sell without some major part of Amazon's system falling apart about every month.

The only reason Amazon is succeeding at this point is most of its sales and sales growth are coming from indpendent companies that are selling on the Amazon markeplace; otherwise Amazon would be a figment of someone's imagination.

It took them six months to fix a minor problem in their shipping program that plagued every reseller to distration. Guess what: shipping problems are back once again and already it is well over a week and still no fix.

It is pure fiction to think that Amazon will be the one who can make fully automated stores.  They can't even keep 40 year old software programs up and running with their applications.

ThanksIwillHaveAnother's picture

No better sign of the USA's cartel economy then Amazon starting its own nationwide delivery service.  It a free market economy companies specializing in shipping would have lower costs but not in a cartel economy.  

Arnold's picture

Rockefeller started out this way.
Shoeshine?

mkhs's picture

Sure, get your shinebox, Arnie.

blueskyranch's picture

Amazon and Google and Microsh*t are words I no longer engage.

I quit Amazon last year...buy Walmart online.

I quit Google in 2015...use Ixquick who uses Goog but protects my identity.

I dropped MS and migrated to an alternative.

 

I seem to be engaged in alternative options now. 

adr's picture

Walmart's market cap is now way below Amazon even though Walmart brings in nearly $500 billion in revenue and makes $145 billion in profit. 

Walmart's market cap is half it's revenue. So how can you value a company that makes a profit 145x Amazon with revenue magnitudes higher so low? 

Nope, no bubble there. Not at all. 

I'd love to hear that Bezos died in a car crash. 

Wrenching Away's picture

No, no, that would be bad for my business. Half my customers work for Amazon, and I like overcharging them for Audi repairs. Amazon is my cash cow.

jamesmmu's picture

they are fucking downplay the drop in operation income, its bubble so it wont matter.

hooligan2009's picture

let's see

Amazon reported earnings of $724 million (quarterly) on net sales of $35.71 Billion

that makes a margin of around 2% - but wait, there is also this

"Operating income is expected to be between $425 million and $1.075 billion, compared with $1.3 billion in second quarter 2016. Wall Street consensus was looking for $1.49 billion."

that's a decline of (using a mid point of 750 million (between 425 and 1075) v 1.3 billion in 2q2016 so a decline of the odd 42% compared to the same year ago quarter (and a full 50% lower than that of the shitfer brains consensus.

looks fantastic!

now compare that to the market cap of 440 billion.

lets say AMZN makes 4 times a quarterly billion bucks (not 750 m) that makes AMZN PE = 440 billion/4 billion earnings or 110? compared to the spot/current PE of 187

what could possibly go wrong?

https://finance.yahoo.com/quote/AMZN?ltr=1

check out the revenue v earnings graph, half way down on the right

 

 

 

aloha_snakbar's picture

Is Bezos a midget or a dwarf?

silverserfer's picture

Well at least Bezos's Washington Post bias fake-news liberal slant on their articles makes me throw up whenever I happen on one thanks to google news. Ive lost 10 lbs since he took over that journalist cesspool. (Its my own fault I know)

mkhs's picture

Well, Honey, it does make your ass look smaller.

monkeydart's picture

This is friggin ridiculous. It's still just a website. Why does AMZN demand such a ridiculous premium over Walmart.com or Chapters.com? 

Anybody want to give me $950? I'll guarantee paying you $1.5 per quarter indefinately! 

AMZN is a solid company but buying it today depends on huuuge YoY growth to maintain that share price. $1.50 in earnings is like 0.16% of the share price. That's crazy. AAPL's latest earnings are like 2.2% of their share price by comparison. 

monkeydart's picture

AMZN's market cap is $440 Billion. Let's apply a 20 P/E ratio as it is a growth company even though it's size is starting to make it too big to grow as happens with all companies (AAPL, MCD, XOM, etc.). AMZN only needs to make $22 Billion. Now apply it's current P/E of like 180 and AMZN is a $4 TRILLION dollar company. 

Enough about AMZN; AAPL is a buy here. We just need the P/E to go to 187 and boom, AAPL is worth 8 Trillion or $1500 per share! 

decentralisedscrutinizer's picture

 

We, as a society,  really have to stop granting corporate charters to just any “Suit” that comes along without first demanding substantial assurances of redeeming social value in return. The "Divine Right Of Kings” does not apply to fictitious entities just because they are “Too Big To Fail”. We can't take the incorporation of such heinous entities for granted anymore. As a matter of political practicality, and because they’re powerful cartels, we can't attack corporations individually because they defend each other with battalions of corporate lawyers; we have to outlaw the corporate culture constitutionally.

 

 

 

It was a loophole in our Constitution that allowed their charters to be so easily obtained. Think about it: We had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, out of stupidity or lack of experience, our Founders granted unrestricted corporate charters to thieves and con men with enough potential capital power to compete with the several states, smaller sovereign nations, and eventually buy out the Federal government itself. Ooooops! Now they all get together and want to buy the whole fucking Planet, coalition armies and all! How whacky is that?!?!

 

 

 

Seriously; an Article 5 Constitutional Convention could solve that problem in days. This is what I think it will take to change the world; and nobody gets hurt:

 

 

 

28th Amendment

 

 

 

Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to:

 

1, prohibitions against any corporation;

 

a, owning another corporation,

 

b, becoming economically indispensable or monopolistic, or

 

c, otherwise distorting the general economy;

 

2, prohibitions against any form of interference in the affairs of;

 

a, government,

 

b, education, or

 

c, news media, and

 

3, provisions for;

 

a, the auditing of standardized, current, and transparent account books, and

 

b, the establishment of a state and municipal-owned banking system

 

c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.