Amazon's Results Should Allay Concerns Co. Is Embarking On Aggressive Investment Cycle Related To Logistics

Amazon.com, Inc. AMZN reported “exceptionally strong” 1Q16 results, beating expectations.

Axiom’s Victor Anthony maintained a Buy rating on the company, while raising the price target from $797 to $811.

1Q Beat

Amazon reported its 1Q revenue at $29.13 billion, representing 28 percent year on year growth, ex-FX, from 26 percent in 4Q15 and ahead of the estimate of 4.5 percent.

“The outperformance vs. our estimates was driven by faster North America and International electronics sales, and continued strong AWS growth,” Anthony mentioned.

CSOI margin came in at 5.7 percent, above the estimate, driven by increased North American margins, marginal international profitability and robust AWS profitability.

Gross margin grew 300 bps, driven by AWS, as well as growth of 3P units, which accounted for 48 percent of the paid units, from 44 percent in 1Q15.

The midpoint of the 2Q revenue guidance was higher than the estimate.

Logistics Business?

“The results, should, in part, allay investor concerns that Amazon is embarking on another aggressive investment cycle tied to a logistics service,” Anthony pointed out.

The company has leased 20 Boeing 767s from Air Transport Services, while purchasing/leasing trailers to enhance delivery speed, efficiency and delivery flexibility between distribution and sortation centers.

“AMZN could very well create a full logistics business, but that is likely years away,” the analyst said.