Amazon Hits New 52-Week High due to Strong Q4 Earnings

Shares of Amazon.com Inc. AMZN touched a new 52-week high of $389.4 on Feb 26, eventually closing at $384.8. Amazon.com now has a $179 billion market cap, making it one of the largest companies in the world.

In the fourth quarter of 2014, Amazon reported a profit of 45 cents, breezing past the Zacks Consensus Estimate of 24 cents. Shares soared more than 12% in extended trading following the report.

Amazon played smart right from the beginning, providing a weak outlook for the seasonally strong fourth quarter and coming back to beat those numbers very strongly. Not just that - it expressed sensitivity to shareholder concerns, providing Prime subscription numbers and growth rates, and promising to break out AWS revenue from the current quarter.

Amazon also mentioned that its investments

were yielding the desired results but pointed out that the strong growth in AWS and the rest of the business would necessitate increased capex this year. Content costs remain high and are expected to grow.

The Street appears to be discounting the revenue miss and the disappointing, or rather conservative guidance.

Key Growth Catalysts

In the fourth quarter, Amazon's revenue was up 42.5% sequentially and 14.6% year over year. This was within the guidance range but slightly short of our expectations.

Key strategies for driving revenue growth remain its vast selection, competitive pricing, free shipping, user experience on Amazon properties and the Amazon Prime program.

To be a formidable player in this space, Amazon must constantly provide excellent services. Prime Now will be a part of an enhanced delivery strategy – an important part of Amazon's growth. Amazon recently started offering one-hour delivery to all of Manhattan.

Fulfillment centers are also important, since they are essential for providing the level of customer service that Amazon customers have gotten accustomed to. Over the past year, Amazon has been investing

heavily in fulfillment and technology & content.

Amazon has taken a very aggressive stand to maintain supremacy in its chosen markets and fourth quarter numbers indicate that it is making progress.

The company's strategy to boost media consumption is two-fold. On the one hand, it is aggressively acquiring and creating new content, be it books, music or video. On the other, it is trying to get consumption onto a common platform such as Prime Music, Prime Instant Video and Kindle

Unlimited. The platform model will naturally boost consumption since the more a person consumes, the cheaper it gets for him/her on a per-unit basis. This would lure more users, in turn giving Amazon leverage against content providers and help it to drive down costs. The ultimate winner is the consumer with Amazon's benefits largely coming from scale.

While still a small contributor to revenue, the company's AWS business continues to grow strongly. Amazon

is the market leader in the segment and growth should continue to come as more businesses move to the cloud. There could also be big gains for investors if the business is spun off.

Amazon is performing true to its form, continuing to grow revenue and generating very strong cash flow quarter upon quarter (discounting seasonal variations).

Amazon currently holds a Zacks Rank #3 (Hold).

Stocks that Warrant a Look

Investors can also consider favorably ranked stocks in the industry like PetMed Express, Inc. PETS, EVINE Live Inc. (EVLV) and Autobytel Inc. ABTL. While  PetMed sports a Zacks Rank #1,  EVINE Live and Autobytel carry a Zacks Rank #2 (Buy).

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