Argus, Baird Talk Amazon After Earnings
Amazon.com, Inc. (NASDAQ: AMZN) reported first quarter earnings last week on April 23 and analysts are still coming in with new ratings on the stock. The e-commerce giant posted increased revenue driven by growth on its cloud platform and increased North American sales. Amazon’s stock shot up 43 percent after the company reported earnings.
Amazon touted that 1Q15 sales were up 15 percent to $22.72 billion, which slightly beat the analyst estimate of $22.4 billion. Amazon Web Services, or AWS, posted $1.57 billion in net sales, marking a 49 percent year-over-year increase. Amazon also saw a significant increase in North American sales, which brought in $13.4 billion in the quarter compared to $10.81 billion in the same quarter last year. Like many companies, Amazon felt the heat of the strengthening of the U.S. dollar against foreign currencies. Consequently, Amazon posted International sales of $7.74 billion compared to $7.88 billion in the same quarter last year.
Amazon reported a loss of ($0.12) per share, in-line with estimates. Operating income increased 74 percent year-over-year to $255 million and operating cash flow increased 47 percent year-over-year to $7.84 billion. Looking forward, Amazon expects to post net sales between $20.6 billion and $22.8 billion for the second quarter, which would be between a 7 percent and 18 percent year-over-year increase. Amazon expects second quarter operating income to be between ($500 million) and $50 million, compared to ($15 million) in the second quarter of 2014.
CEO Jeff Bezos remained focused on AWS in his comments; “Amazon Web Services is a $5 billion business and still growing fast… Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence. We manage by two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term. We are so grateful to our AWS customers and remain dedicated to inventing on their behalf.”
On April 27, analyst Joseph Bonner of Argus Research downgraded Amazon from Buy to Hold following the company’s quarterly report. Bonner noted the massive increase in AWS revenue, but noted that “business accounted for just 7 percent of total revenue.” The analyst added, “[Amazon] continues to move forward on a number of fronts critical to its business, including the expansion of its Prime membership loyalty program, international growth, the further development of the Kindle/Fire device ecosystem, and Amazon Web Services.” Bonner expects continued spending on infrastructure investments and lowered his 2015 EPS estimate from $1.57 to $0.98, though he raised his 2016 EPS estimate from $1.88 to $1.92.
Joseph Bonner has only rated Amazon 3 times since April 2014, but has a 100 percent success rate recommending the stock with a +35.1 percent average return per AMZN rating. Overall, Bonner has an 80 percent success rate recommending stocks with a +12.2 percent average return per recommendation.
Separately on April 24, analyst Colin Sebastian of Baird reiterated an Outperform rating on Amazon and raised his price target from $425 to $465. He noted that he, like most analysts, did not expect much from AWS but the cloud computing platform “exceeded even our above-consensus expectations for modest profitability.” Sebastian continued, “While the implied lower Retail/Media margins may give investors pause, incremental North American retail margins (~8 percent) indicate potential for healthier long-term segment profitability.”
Colin Sebastian has rated Amazon 25 times since April 2011, earning an 86 percent success rate recommending the stock with a +26.9 percent average return per AMZN rating. Overall, Sebastian has a 69 percent success rate recommending stocks with a +15.9 percent average return per recommendation.
On average, the top analyst recommendation for Amazon on TipRanks is Moderate Buy.
Latest Ratings for AMZN
|Oct 2016||Credit Suisse||Maintains||Outperform|
|Oct 2016||Morgan Stanley||Maintains||Overweight|
|Oct 2016||SunTrust Robinson Humphrey||Maintains||Neutral|
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