Amazon's profit fell in the December quarter to $214 million, or 45 cents a share, compared to $239 million, or 51 cents a share, in the year-earlier quarter. However earnings beat expectations of 17 cents a share. Net sales rose 15% to $29.33 billion for the December quarter, a bit shy of analysts' forecast of $39.67 billion.
Amazon shares were soaring 13.1% to $352.55 as of midday Friday. Here's what analysts said.
Brian Pitz, Jefferies (Buy; $400 price target)
Amazon delivered a solid print -- slight top-line miss on FX headwinds and better than expected profitability. Guidance reflected stronger FX impact in 1Q15 and continuing investment in new geographies and infrastructure (fulfillment & AWS). And given that this investment is still driven by strong growth in the core business and AWS (1MM+ customers) our LT thesis remains intact. Reiterate Buy and raise PT to $400.
Two focus areas for mgmt should be, in our view: 1) China -- where a potential partnership with JD.com (JD) - Get JD.com, Inc. (JD) Report / Tencent (TCEHY) would make sense to leverage JD's fulfillment capabilities while facilitating JD's expansion into new categories; all the while leveraging Tencent's mobile relationships; 2) Media category -- with consumers moving away from download to streaming, AMZN needs to continue to refine its business model (given that it has historically been an important part of its overall business and ties somewhat to device strategy).
Mark May, Citigroup (Buy; $405 price target)
Amazon reported 4Q14 results that were above expectations, driven by upside in AWS and N.A. EGM sales and better-than-expected operating leverage. 1Q15 guidance was roughly in line when FX is taken into account, mgmt commentary on spending and margins was encouraging, and we are slightly trimming our CY15 sales estimate while raising our CSOI forecast. The solid top line results, better-than-expected bottom-line results, better-than-feared Q1 guidance, plans to expand segment disclosures starting in Q1, and mgmt commentary about prioritizing expense efficiency in 2015 are likely all contributing to the positive after-market stock performance. We upgraded to Buy on 1/13/15 and the results and commentary support the thesis laid out then. We maintain our Buy rating and raise our target price to $405.
Management's 1Q15 sales guidance of $20.9bn-22.9bn is 2% below our prior estimate ($22.3bn) at the mid-point ($21.9bn) and CSOI of 0 to 500mn is below our prior estimate ($567mn) at the mid-point ($250mn) -- driven in both cases, we believe, by greater than previously estimated FX headwinds, and to a lesser degree, lower forecasted media segment growth.
Heath Terry, Goldman Sachs (Buy; $430 price target)
Amazon reported 4Q revenue of $29.3bn (+14.6% yoy vs. +20.4% in 3Q), above the midpoint of guidance but just below consensus at $29.65bn. Adjusted op. income margin was 3.5%, versus consensus at 2.2% on COGS leverage. Ex-FX revenue growth decelerated to +18% from +20% in 3Q, as Media revenue continued to slow due to the video game console cycle. 1Q revenue guidance of $20.9-$22.9bn compares to consensus of $23.0bn, implying growth acceleration of as much as 300bp. GAAP op. income guidance of $(450)-$50mn compares to consensus of $114mn. We continue to believe Amazon's investment in infrastructure, logistics, and web services is paying off in the form of market share gains, cash flow growth (Exhibit 3), and continued high returns on invested capital. Therefore, we remain Buy rated (CL).
We raise 2015-17 revenue/adj. EBITDA estimates by 2% each, on average, to reflect faster AWS growth and easing comps through 2015.
Chad Bartley, Pacific Crest Securities (Outperform; $435 price target)
AMZN remains a top idea for 2015. Q4 margin and earnings upside, and AWS acceleration, should increase investor confidence in the long-term outlook for the company. We are raising our margin and earnings forecasts, and are buyers of AMZN.
Q4 revenue and adjusted operating income were $29.33 billion and $1.04 billion compared to guidance of $27.3 billion to $30.3 billion and ($100 million) to $900 million and consensus of $29.7 billion and $656 million. AWS revenue was better than expected and growth continued to accelerate. Operating margin was 3.5%, compared to our forecast of 2.7% and 3.4% in 4Q13. EPS was $1.42 vs. consensus of $0.90. Lower taxes accounted for $0.12 of the upside, but the majority was driven by higher gross margin and lower fulfillment costs.
Ronald Josey, JMP Securities (Market Perform)
We maintain our Market Perform rating on Amazon.com (AMZN) shares after the company reported solid 4Q14 earnings results. Revenue of $29.33 billion (+18% ex-FX) came in 1% below consensus,but also included an $895 million unfavorable impact from FX. Gross profit growth re-accelerated to ~28%Y/Y as gross margins expanded 300 bps Y/Y to 29.5% on strength from third-party sellers and continuedgrowth at AWS. Importantly, PF operating income of $1.04 billion came in 15% above the high end ofAmazon's guidance, and as a result, PF operating margins improved 10 bps Y/Y to 3.5%.
While webelieve Amazon remains in investment mode, we believe 4Q results could alleviate some concerns aroundAmazon's continued investment spend and on margins overall. North America EGM once again stood outas results came in 4% above our projections, and we believe Amazon is benefiting from the 53% growthin Prime users globally. But media continues to be a concern, and we note that media growth slowedto +1% Y/Y in North America in 4Q and declined 1% Y/Y ex-FX internationally; we believe these trendsare likely to continue. Given better-than-expected results, and the announcement that Amazon expectsto start reporting AWS results in 1Q15, the shares rose 12% in after-hours trading to ~$350. While weare encouraged with potential margin stabilization and increased AWS transparency, we believe the risk/reward in the shares remains balanced.
TheStreet Ratings team rates AMAZON.COM INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"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
-- Written by Laurie Kulikowski in New York.