Amazon Wasn't Profitable Again, And That's OK

Amazon.com, Inc. AMZN reported its Q3 results mostly in line with the estimates but mixed in terms of the consensus expectations.

Cantor Fitzgerald’s Youssef Squali maintains a Buy rating on the company, with a price target of $1,000.

Positive Expectations

“In typical Amazon fashion, increased investments in infrastructure, video content and India weighted on profitability,” Squali mentioned.

On the other hand, the stable year-on-year revenue growth is evidence of Amazon’s “powerful flywheel,” Prime, while FBA drove increased velocity of orders supported by an optimized delivery platform.

The analyst believes top-line growth and year-over-year margin improvement could be key drivers of the stock over time.

However, profitability metrics are expected to continue to be volatile quarter-to-quarter, with downside risk in the near term and management investing aggressively in specific initiatives.

Mixed Results

Amazon reported its Q3 revenue in line with expectations at $32,714 million, representing 29 percent year on year growth.

GAAP EPS missed the consensus forecast at $0.52, while adjusted EBITDA was in-line with the consensus at $3,428 million.

AWS continued to be strong, with revenue growth of 55 percent year-on-year. Operating margin also continued to improve, reaching 31.6 percent during the quarter.

The company reported solid growth across geographies, with North America sales rising 26 percent year-on-year and international sales growing 28 percent.

At last check in Friday's pre-market, Amazon was down 5.42 percent at $774.

Image Credit: By SounderBruce from Seattle, United States (Amazon Books at U Village) [CC BY-SA 2.0], via Wikimedia Commons.