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Vlad Deshkovich
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Investor focused on the technology sector.
  • Amazon WIll Outperform Earnings Expectations 2 comments
    Jan 20, 2013 12:39 PM | about stocks: AMZN

    Amazon(AMZN) Inc. will be releasing its earnings report for Q4 2012 on January 31st 2013. Based on the company's rising profits, as well as the sector's performance in general, I believe that Amazon will release an above-expected earnings report that will send the stock higher at the end of January.

    To begin with, Amazon has had 4 quarters of massive profits starting with Q4 2011.

    Gross Profit (In millions USD)

    Q3 2011

    Q4 2011

    Q1 2012

    Q2 2012

    Q3 2012

    2,551

    3,601

    3,158

    3,346

    3,487

    Amazon made $1,050 million more gross profit in Q4 2011 than Q3 2011. This surge corresponded to recovering consumer sentiment out of the recession, which led to Amazon having a record quarter. Its profit has remained steady, albeit rising, throughout 2012. There is no reason for this trend to stop, as macroeconomic indicators all point to increasing consumer spending.

    In order to gain insight into how Amazon will perform, we must look at its direct competitor: eBay(EBAY) Inc. Amazon and eBay have the 1st and 2nd largest market capitalizations in the industry, respectively. These two corporations are the very face of e-commerce. The two stocks have mirrored each other graphically over the last year, rising and falling at the same rate:

    (click to enlarge)

    While Amazon is yet to release its earnings, eBay released its earnings report several days ago, posting an excellent quarter. eBay's revenue Q4 2012 was 18% higher than its revenue Q4 2011, as well as a 16.25% profit growth from the previous quarter. Since the trend lines of the stocks are nearly identical, it is a safe assumption that Amazon will have performed just as well the previous quarter; if people are buying online with eBay, they are definitely buying online with Amazon.

    What Amazon also has going for it is the unstoppable growth of e-commerce. As people are becoming more comfortable with the internet they are doing more of their shopping from home. There are heaps of anecdotal evidence in this situation, but the numbers are there as well. comScore(SCOR) Inc. publishes a report where it measures the growth of e-commerce spending. Between Q1 2010 and Q3 2012, the growth every quarter has had a range of 9% to 17%. Q4 2012 will surely be on the higher end of that. What these numbers mean is that online shopping is here, and it's here to stay. Expect Amazon to post an incredible quarter and for its stock to appreciate as a result. Going long on AMZN or EBAY is a safe bet.

    Disclosure: I am long AMZN.

    Themes: Technology Stocks: AMZN
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Comments (2)
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  • Didn't Amazon report a $275 Million loss the August-October quarter? If so, how can there be rising profits? I'm thinking they might report a $500 million loss for the Holiday quarter that ended 3 weeks ago. Let's see.
    21 Jan 2013, 12:11 PM Reply Like
  • Author’s reply » Amazon did have a rise in operating expenses for whatever reason, but their gross transactions and profit have continued to go up. I think that they will post a profit.
    21 Jan 2013, 01:15 PM Reply Like
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