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Amazon reports record sales and profits, but investors are not surprised



According to Thursday's earnings report, Amazon.com Inc. a $ 3 billion profit was generated by record-breaking holiday sales, but growth forecasts could have saved their stock from profits.

The online retailer reported a fourth-quarter profit of $ 6.04 for revenue of $ 72.4 billion on Thursday afternoon.

AMZN + 2.89%

and a strong growth from the 2017 holiday shopping season, when the company reported $ 3.75 per $ 60.5 billion. According to FactSet, analysts averaged $ 5.85 billion in earnings. It was the second consecutive holiday quarter that Amazon began to evaluate after not doing it since 2009.

Amazon's shares, however, did not get a big blow out of the top because after the announcement, stocks fell by about 1%, and in the next earnings – Thursday afternoon. Shares fell by 4.5% when the call ended.

One of the reasons for the decline could be the downturn guidelines for the first quarter when Amazon expects revenues of $ 56 billion to $ 60 billion; According to FactSet data, analysts waited on average for $ 60.83 billion before the report. The conference call managers also noted that Amazon might increase expense in 2019 compared to 2018, when Amazon's fuel consumption slowed Amazon's profitability – the company reported a net income of over $ 10 billion in 2018. $ 3 billion in 2017

"In many ways, in 2018, we talked about increasing investment efficiency for people, warehouses, infrastructure we have introduced in 2016 and 2017," said Finance Director Brian Olsavsky. "While we will continue to promote growth and customer offers at the same time, as well as the benefits that we will gain, we definitely take the cost seriously and we will continue to work on efficiency, I hope investment will increase compared to 2018."

Amazon has already announced plans to open new universities in New York and Washington, D.C. regions after a long search for a second home. Olavsky reiterated that Amazon plans to spend $ 5 billion on these efforts and hire 50,000 employees, as well as hiring 5,000 people in Nashville, Tenn.

For more: Why Amazon HQ2 won't create two more Seattles

The first quarter forecast would generate revenue growth of 10% to 18% after Amazon recorded a 20% increase in sales in the fourth quarter. Some analysts believe that Amazon is entering a lower growth rate because it is trying to restore growth across the food chain and continues to look for new international markets that may not bring immediate benefits.

"Our new rooms reflect a softer international economic landscape, especially in Western Europe, as well as a significant reduction in growth prospects for Whole Foods, which we see are facing both increased competition and potentially some brand loyalty issues," Benchmark analyst Daniel Kurnoss wrote this week mark a note by lowering your bid target to $ 2,000 from $ 2,100.

More: Amazon plans to expand the availability of its Whole Foods stores

In the fourth quarter, Amazon reported that sales in physical stores fell by 3% from the previous year, from $ 4.52 billion to $ 4.4 billion. Beyond Whole Foods, Amazon also has physical bookstores and shops, and has opened some pop-up stores around the weekend to sell popular gifts on its website, including its offerings such as the Alexa-based Echo speaker line.

As seen by Wedbush analyst Michael Pacert, Amazon is also experiencing increasing sales from third-party vendors in its market, reducing net sales.

"As Amazon only reports fees (about 30% of GMV) from third-party sales, higher third-party combined revenue reduces reporting without affecting EPS," Pachter said before the report.

In its report, Amazon noted that in the fourth quarter, more than 50% of the platform sales were made by small and medium-sized enterprises. In an invitation, Olavsky suggested that Amazon might consider changing the charging structure it collects from vendors in response to these questions.

“More than half of our sales units come from third-party vendors, so it's very important to us that we have an appropriate business profile for both Amazon and vendors. That's why we will always develop it, ”said the CFO. “Some of them are a change in charging structures, sometimes adding new fees or subtracting old charges, some of which include increasing or decreasing the charges paid by sellers. So you will always see it from us. "

See also: Amazon's profit growth engine has nothing to do with e-commerce

However, Amazon Web Services continued to be Amazon's profit and growth engine. The cloud computing group reported sales growth of 45%, to $ 7.43 billion from $ 5.11 billion and operating income rising 61% to $ 2.18 billion from $ 1.35 billion.

Amazon also continued to benefit from the massive growth of its advertising industry. The company reported revenues of $ 3.39 billion in its segment – mostly in advertising sales, although it also includes other service offerings – 95% more than the $ 1.74 billion annual growth. Throughout the year, Amazon announced more than $ 10 billion in revenue from advertising and other service segments, which is more than double US $ 4.65 billion reported in 2017.

On Thursday, Amazon closed 2.9% higher than US $ 1,718.73. The stock has increased by 18.5% last year as the S&P 500 index

SPX + 0.86%

has fallen by 5.1%.


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