Amazon's Margin Myth: Sleight Of Hand
Paulo Santos • 108 Comments
Paulo Santos • 108 Comments
Amazon's Margin Myth: Sleight Of Hand
Paulo Santos • 108 Comments
Paulo Santos • 108 Comments
Apr. 24, 2014, 4:42 PM
- Amazon (AMZN) reports a 26% gain in sales in North America to $11.86B and a 18% rise in sales for its international business to $7.88B. Profits increased at a faster rate on the U.S. side.
- Overall, Amazon's operating margin narrowed 40 bps Y/Y to 1.1%. Once again, management wasn't shy about letting operating expenses grow right along with sales.
- The company sees revenue of $18.1B-$19.8B in Q2 vs. $19.0B consensus. An operating loss of up to $455M is expected for the period.
- AMZN +2.1% AH
Apr. 24, 2014, 1:08 PM
- Re/code reports Amazon (AMZN +3.5%) is paying HBO (TWX +0.1%) $300M+ over three years for its streaming deal. While steep, that figure is less than many estimated, particularly given the cost of Amazon's deals with Viacom and Epix.
- The Amazon/HBO deal covers many of HBO's biggest hits, including The Sopranos, The Wire, Six Feet Under, Boardwalk Empire, and True Blood (early seasons for the last two). But it doesn't cover HBO's biggest current hit (Game of Thrones).
- Separtely, Amazon has launched Prime Pantry, its latest salvo at supermarkets and Wal-Mart/Target's grocery ops. Prime Pantry allows Prime subs in the continental U.S. to have up to 45 pounds of groceries shipped for a flat fee of $6. It arrives as Amazon gradually expands the reach of its AmazonFresh same-day delivery service.
- Shares are up strongly ahead of today's Q1 report. Recent ChannelAdvisor data has been encouraging, a sales tax survey less so.
Apr. 8, 2014, 11:55 AM| Apr. 8, 2014, 11:55 AM
Apr. 8, 2014, 11:34 AM
- Aided by better weather, ChannelAdvisor (ECOM +4.2%) clients saw a 26.2% Y/Y increase in their Amazon (AMZN +3%) same-store sales in March, up from 23% in February and 14% in January.
- eBay (EBAY +3.1%) same-store sales rose 17.8% in March vs. 15% in February and 12.7% in January. Fixed-price sales +21.5%, auctions -10%, Motors +19.7%.
- Search ad-driven same-store sales, dominated by traffic from Google's (GOOG +3%) AdWords, rose 11.2% vs. 4.3% in February and 10.3% in January. Clicks were flat due to a shift towards Google's Product Listing Ads (PLAs). Ad prices fell 7% (soft smartphone ad prices are a likely factor), click rates rose 2%, and average order value rose 5%.
- PLA-driven same-store sales rose 34.5%. Though that's down from February's 48% and January's 62.8%, ChannelAdvisor chalks it up to "a normal aging of the program," given PLAs only launched in late 2012.
- Amazon, eBay, and Google are all posting solid gains amid a broader rebound in Internet stocks.
Apr. 2, 2014, 8:44 AM
- Share of Amazon (AMZN) are on watch today with the company set to host an event in New York City during which a video-streaming device is expected to be introduced.
- The event begins at 11:00 a.m. ET.
- What to watch: Though the device (either set-top box or dongle) will pivot around Amazon Prime, the companies which get invited into the box with third-party apps could set the tone for the direction Amazon might be with its streaming model. There's some speculation that standing as a paywall to other content could be part of the Amazon long-term plan.
- AMZN +0.7% premarket
Mar. 18, 2014, 8:19 AM
Mar. 13, 2014, 8:38 AM
- Amazon (AMZN) confirms in an e-mail to customers that it will bump up the price of Amazon Prime to $99 when their memberships renew.
- The company notes the 40K movie and TV episodes available to customers through Prime Instant Video, along with the 500K books through the Kindle lending library.
- It also makes some hay out of the two-day free shipping option for Prime members which now includes 20M items.
- AMZN +2.1% premarket
Feb. 12, 2014, 9:47 AM
- Amazon (AMZN -1.6%) has been cut to Neutral by UBS. The firm cites Amazon's soft Q4 top-line performance, and a CIRP survey that indicates only 58% and 24% of Prime subs would respectively renew following price hikes of $20 and $40 (currently under consideration).
- Intuit (INTU -5%) has been cut to Underweight by Evercore following its FQ2 guidance cut.
- Veeco (VECO +3.1%) has been upgraded to Outperform by Credit Suisse ahead of its Feb. 19 Q4 report.
- comScore (SCOR -0.8%) has been upgraded to Outperform by Northland following its Q4 beat.
- Itron (ITRI +5.5%) has been upgraded to Buy by Needham ahead of today's Q4 report.
Jan. 31, 2014, 2:38 PM
- Though its shares have tumbled, Amazon (AMZN -9.9%) has received an equal number of PT hikes and cuts (7 apiece) after missing Q4 estimates, offering soft Q1 guidance, and stating it's weighing a Prime price hike as it contends with heavy usage and still-surging fulfillment spend. S&P is the only firm to change its rating, cutting shares to Sell.
- Benchmark remains optimistic about long-term margin expansion, and believes Amazon will still deliver 32% OIBDA growth in Q1. The firm chalks up Q4's major slowdown in EGM revenue growth (23% vs. 29% in Q3) to aggressive holiday season electronics discounting.
- Cowen estimates a Prime price hike would produce $380M-$760M/year in gross profit at current subscriber levels. Morgan Stanley believes the churn impact of a hike would be limited, given its belief "Prime remains one of the best values around."
- Susquehanna likes the fact gross margin rose again. Evercore thinks Amazon's paid unit growth slowdown (25% vs. 29% in Q3) is "largely temporary," and have much to do with Amazon's international media sales being behind its U.S. ops in transitioning to digital.
- Amazon mentioned on its CC (transcript) active accounts rose by 13M Q/Q to 237M. 3rd-party sellers accounted for 39% of paid units vs. 40% in Q3.
Jan. 31, 2014, 9:09 AM
Jan. 30, 2014, 4:26 PM
- Amazon (AMZN) saw revenue growth decelerate in Q4 from the previous two quarters (Q3 24%, Q2 22%).
- North America sales rose 25.9% Y/Y to $15.33B, while International sales were up 12.8% to $10.26B.
- The company saw a nearly even growth rate between media and electronics in North America.
- Q1 guidance is below expectations. Sales are projected at $18.2B-$19.9B and the company sees an operating gain/loss of -$200M to $200M.
- AMZN -9.9% AH
Jan. 17, 2014, 9:15 AM
- The warning from UPS (UPS) this morning is a double-edged sword with Q4 EPS cut due to transitory higher costs from temporary workers, but the outlook for 2014 factoring in more underlying demand factors. UPS stayed within its long-term profit growth targets, but missed analyst expectations.
- Shares of FedEx (FDX) are lower in early trading after the UPS guidance cut.
- Though there's plenty of speculation that the UPS Q4 miss, due in part to a surge in late online orders, could be a signal that Amazon's (AMZN) delivery traffic exceeded expectations - investors aren't betting the house on that premise just yet.
- Premarket: UPS -2.9%, FDX -1.3%, AMZN -0.1%.
Dec. 13, 2013, 9:38 AM
- Amazon (AMZN +1.3%) has been upgraded to Strong Buy by ISI.
- Stratasys (SSYS +2.5%) has been started at Overweight by Stephens.
- Ciena (CIEN +1.5%) has been upgraded to Outperform by BMO a day after posting mixed FQ4 results and slightly disappointing FQ1 revenue guidance (midpoint below consensus).
- Ubiquiti (UBNT +1.1%) has been started at Outperform by Wells Fargo.
- Procera (PKT +2.1%) has been started at Buy by D.A. Davidson.
- China Mobile Games (CMGE +3%) has been started at Buy by Brean.
Dec. 3, 2013, 11:10 AM
- Rackspace (RAX -5.9%) is once more falling (previous) due to a product announcement from a cloud infrastructure (IaaS) rival, only this time the culprit is Google (GOOG +0.5%) rather than Amazon (AMZN -1.8%). The search giant has taken its Compute Engine IaaS platform out of beta, and has cut computing and persistent storage prices by 10% and 60%, respectively.
- Amazon is also lower, as are Red Hat (RHT -1.3%) and data center owner Equinix (EQIX -0.9%). Like Racksapce, Red Hat is a major supporter of the OpenStack IaaS platform.
- In addition to cutting prices, Google has greatly expanded Compute Engine's feature set. The company has added support for more Linux variants (inc. Red Hat and rival distributions) and popular app deployment tool Docker, and is launching a 16-core computing instance and high-I/O storage instances for intense workloads.
- Amazon, which just unveiled several new cloud services, still has a big edge on Google in terms of scale, feature set, and developer support. But consulting firm Scalr declares Google to be ahead of Amazon in terms of performance and reliability. They're considered even on pricing.
- Moreover Google's IT and engineering resources, together with its expertise in creating cheap, high-performance, data center hardware, should make it a solid rival in time, at least for basic computing/storage services.
- Previous: Amazon dominates cloud infrastructure
Nov. 14, 2013, 2:21 PM
- Several analysts argue Amazon's (AMZN +3.1%) cloud-based WorkSpaces PC virtualization platform could prove to be a long-term threat to Citrix (CTXS -5.4%) and VMware's (VMW -2.9%) on-premises offerings.
- Nomura notes WorkSpaces is initially focused on SMBs, who tend to shy away from expensive on-premises deployments, rather than the enterprises Citrix derives a large portion of its sales from. But it still thinks the platform could become "a serious and broader-based competitor if it ends up vying for larger enterprises." Jefferies, meanwhile, calls WorkSpaces attractively priced and a threat to the majority of Citrix's business.
- Stifel is defending Citrix. The firm argues Amazon is "targeting the low-end of the DaaS market as it doesn’t offer the full range of features (or deployment options) that Citrix’s desktop solutions offer." It's worth noting many cloud-based apps/services initially targeted SMBs before gradually moving upmarket.
- Also: Amazon has launched AppStream, a service that allows apps hosted on its cloud infrastructure to be streamed to mobile devices (and perhaps eventually PCs). The service could end up acting as competition for Citrix and VMware's app virtualization platforms.
- In addition to Amazon, Cisco's guidance is likely pressuring Citrix and VMware. Citrix and Cisco have an application delivery controller partnership, and VMware (though competing with Cisco in some areas) maintains a multi-faceted software alliance with the networking giant.
- Last month, VMware bought Desktone, developer of a PC virtualization platform than can enable cloud-based services. VMware has promised to cross-sell Desktone's platform to its 11K service provider partners.
Nov. 13, 2013, 1:43 PM
- At its annual re:Invent conference, Amazon Web Services (AMZN +1.2%) has unveiled WorkSpaces, a PC virtualization offering that allows businesses to host virtual desktops on Amazon's cloud infrastructure.
- PC virtualization/thin client software leader Citrix (CTXS -3.7%) dived following the product launch, but has recouped some of its losses following news the company is an AWS PC virtualization partner. Top Citrix rival VMware (VMW +0.2%) has fallen moderately, but is still near breakeven.
- Amazon asserts WorkSpaces is easier to manage than traditional PC virtualization offerings, and also carries much lower up-front costs. AWS chief Andy Jassy: "Virtual desktops are difficult to set up, they’re difficult to manage, you have to worry about the hardware, the virtual desktop infrastructure ... We wondered if there were an easier way."
- WorkSpaces is priced fairly aggressively - Amazon is charging $35-$60/month per user, depending on the plan, and doesn't require any long-term commitments.
- Also: AWS, which has depended heavily on Internet companies for its early growth, has bolstered its enterprise chops by adding support for SAML 2.0, a commonly-used identity management protocol. Adding SAML 2.0 support makes it easier for enterprises to manage access to, and enable single sign-on for, AWS-hosted services.
Amazon.com, Inc. provides online retail shopping services. It provides services to four primary customer sets: consumers, sellers, enterprises, and content creators. The company also provides other marketing and promotional services, such as online advertising and co-branded credit card... More
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