NEW YORK (TheStreet) -- Shares of Amazon.com (AMZN) are soaring, up 12.9% to $325 in pre-market trading Friday, after the online retailer surpassed analysts' profit estimates in its fourth-quarter earnings report late yesterday.
The company reported earnings of 45 cents per share for the fourth quarter, topping the consensus estimate of 18 cents per share. The company said a rise in Amazon Prime memberships fueled the jump in profit.
For the fourth quarter, the online retailer posted revenue of $29.33 billion, compared to analysts' estimates of $29.65 billion.
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However, Amazon now expects revenue in a range of $20.9 billion and $22.9 billion for the first quarter of 2015, lower than analysts' estimates of $23.05 billion for the period.
Seattle-based Amazon sells a range of products and services through its various owned and affiliated websites, as well as manufactures electronic devices.
"We rate AMAZON.COM INC (AMZN) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself, poor profit margins and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 965.9% when compared to the same quarter one year ago, falling from -$41.00 million to -$437.00 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, AMAZON.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of AMAZON.COM INC has not done very well: it is down 23.30% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for AMAZON.COM INC is currently lower than what is desirable, coming in at 34.98%. Regardless of AMZN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.12% trails the industry average.
- AMAZON.COM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMAZON.COM INC turned its bottom line around by earning $0.58 versus -$0.10 in the prior year. For the next year, the market is expecting a contraction of 224.1% in earnings (-$0.72 versus $0.58).
- You can view the full analysis from the report here: AMZN Ratings Report