Fri, Apr. 24, 12:39 PM
- Janney, JPMorgan, and Raymond James have upgraded Amazon (NASDAQ:AMZN) after the company beat Q1 estimates on the back of a 24% Y/Y increase in North American segment revenue, guided in-line, and (importantly) reported AWS had a $265M Q1 op. profit on revenue of $1.57B ($680M and $5.16B for the trailing 12 months). At least 7 other firms have hiked their targets. Amazon's market cap is at $181.6B.
- JPMorgan's Doug Anmuth (upgrade to Overweight, $535 target) now values AWS at $66.3B, or 16x estimated 2016 EBITDA. "[W]e think the reported profitability level far exceeded virtually all expectations. CSOI margins of 17% in 1Q15 and 14% in 2014 have been driven by increasing scale and greater utilization, along with additive services beyond core EC2 and S3 [computing and storage] services. When factoring in heavy depreciation, AWS has EBITDA margins of around 50%."
- Janney's Shawn Milne (upgrade to Buy): "AWS segment margins of 16.9% in Q1, 14.2% in FY14 — well ahead of general Street thoughts that AWS was in 'investment mode,' and losing 5-10% (or more)." He does note Amazon's North American retail op. margin fell to 2.5% in 2014 from 2.8% in 2013 (thanks largely to the Fire Phone debacle), but adds it rebounded to 3.9% in Q1.
- Raymond James' James Kessler (upgrade to Outperform) focuses on Amazon's total margin improvement. "Non-GAAP operating margin of 3.1% was ~100 bp above our/consensus estimates driven by improved gross margins and modestly lower than expected operating expenses. Amazon also guided 2Q margins above consensus at the high end."
- On SA, Brian Nichols argues AWS would be worth $50B at 45x forward op. income, and thinks the business could be valued at $85B if publicly traded by itself. The Panoramic View: "Facebook and other leading tech companies used to garner a 10x revenue valuation when they were in similar stages of development. I think that the same can be applied to AWS."
- On the CC (transcript), Amazon stated active customer accounts rose by 8M Q/Q to 278M (260M paying customers). Y/Y paid unit growth was steady at 20%, and 3rd-party sellers made up 44% of sales vs. 43% in Q4.
- Prior Amazon earnings coverage
Thu, Apr. 23, 5:46 PM
- In its first quarter of breaking out Amazon Web Services' performance, Amazon (NASDAQ:AMZN) states the cloud infrastructure giant had Q1 revenue of $1.57B (+49% Y/Y) and (in spite of AWS' aggressive pricing) an op. profit of $265M (+8%).
- Driving the Q1 revenue beat: North American revenue (not counting AWS) rose 24% to $13.4B, with segment op. profit totaling $517M - media +5%, electronics/general merchandise +31%. On the other hand, international revenue fell 2% to $7.7B; sales would've risen 14% if not for forex. International media -12%, EGM +4% . The segment had a $76M op. loss.
- With the help of AWS and 3rd-party seller growth, gross margin rose to 32.2% from 28.8% a year ago. Fulfillment spend +19% to $2.8B, marketing +24% to $1.1B, tech/content +38% to $2.8B, G&A +31% to $427M.
- Free cash flow for the trailing 12 months rose to $3.16B from $1.94B at the end of Q4 and $1.49B a year earlier. Q2 op. profit/loss guidance assumes $600M in stock compensation and amortization costs.
- AMZN +6.7% AH to $415.95, taking out its old highs along the way.
- Q1 results, PR
Thu, Apr. 23, 4:06 PM| 43 Comments
Wed, Apr. 22, 5:35 PM
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Wed, Feb. 18, 12:15 PM
- Down AH yesterday due to the light sales guidance provided with its mixed Q4 results, Rackspace (RAX +1.4%) is now back above $50. Helping its cause: Pac Crest has upgraded to Outperform, and at least four firms have hiked their targets.
- Pac Crest cites enterprise and OpenStack momentum as reasons for upgrading: "In the second half of 2014, Rackspace won more large enterprise contracts worth at least $100,000 per month than it had in the prior five quarters combined ... management indicated that OpenStack now makes up more than 50% of its public cloud revenue, which implies OpenStack revenue is at least 15.6% of its total revenue."
- Cowen (target hiked to $75) now considers it likely Rackspace "will announce support for a mega cloud provider in 1H15," thereby boosting its long-term addressable market and lowering future capex needs (in exchange for sharing revenue). It adds sales guidance was in-line after adjusting for forex, and that EBITDA margin guidance was better than expected.
- Meanwhile, new CEO Taylor Rhodes argues the cloud infrastructure (IaaS) market's price war is calming down. "Amazon Web Services (NASDAQ:AMZN) in November, for the first time, didn’t make a price cut move ... AWS is feeling like they are the reference brand leader, that they are strong versus Google (NASDAQ:GOOG), so they don’t need to do it as much. Microsoft (NASDAQ:MSFT) is cutting price, but who knows how much share they are actually taking."
- He also reiterates Rackspace's assertion that its OpenStack/hybrid cloud offerings are differentiated in the battle for enterprise accounts. "The mainstream market has two problems: They have legacy apps that won’t go [to multi-tenant public clouds] automatically ... the second problem they have is this skills set gap ... There is a need for software and tools development."
- Q4 results, guidance/details
Fri, Jan. 30, 2:24 PM
- Amazon's (AMZN +14.8%) Q4 North American op. margin of 5.4% was its highest in three years, notes SunTrust's Robert Peck, reiterating a Buy and upping his target to $370. Peck is also pleased gross margin rose Q/Q in spite of seasonality, even if one backs out Other (i.e. AWS) revenue. Third-party seller and fulfillment service growth drove the gains, as did improved efficiency.
- Topeka's Victor Anthony likes the fact Prime memberships rose 53% in 2014 (no precise subscriber number has been given, as usual) in spite of Amazon's $20 price hike. Benchmark's Daniel Kurnos observes the bulk of Amazon's Q4 revenue miss was due to its international ops, where the company took an $895M forex hit.
- B. Riley's Scott Tilghman (Neutral) is more cautious. "We aren’t convinced the company has the same leverage opportunity in non-holiday quarters, and this seems to be captured in its 1Q guidance, which assumes bigger FX headwinds and lower Y/Y profit." On SA, Paulo Santos is as bearish as ever, citing (among other things) the top-line miss and a 4% drop in Media revenue.
- During the CC (transcript), CFO Tom Szkutak stated Amazon would begin breaking out AWS revenue for the first time in Q1. He also mentioned (giving encouragement to bulls) Amazon is "putting even more energy and attention on driving what we would call fixed expense and variable expense productivity as well as other efficiency projects."
- Also disclosed: Third-party seller units made up 43% of Q4 unit sales, up from Q3's 42%. Annual paid unit growth slipped to 20% from Q3's 21%.
- Prior Amazon earnings coverage
Thu, Jan. 29, 5:05 PM
- Amazon (NASDAQ:AMZN) expects Q1 revenue of $20.9B-$22.9B (+6%-16% Y/Y), below a $23.05B consensus. Op. income guidance is at -$450M to $50M, and includes $450M in stock compensation and amortization costs.
- Revenue growth fell to 15% in Q4 from 20% in Q3, with North American sales (64% of total) rising 22% and international only 3%. International would've been up 12% if not for forex.
- Media revenue fell 4% Y/Y in Q4 to $6.95B (international -8%, North America +1%). But electronics/general merchandise rose 21% to $20.6B (international +10%, North America +27%).
- Other revenue (dominated by AWS) rose 26% Q/Q and 41% Y/Y to $1.74B. AWS usage was up nearly 90% Y/Y, and active customers now top 1M.
- Contributing to the EPS beat: Gross margin rose to 29.5% from 26.5% a year ago. Also helping: While fulfillment spend rose 17% Y/Y to $3.4B, that's a much slower pace than Q3's 30%. Marketing spend +35% to $1.5B; tech/content +42% to $2.6B; G&A +39% to $442M. Op. margin was 2%, even with a year ago.
- Third-party sellers using Amazon's fulfillment services rose over 65% Y/Y in 2014 (share gains against eBay), and accounted for over 40% of Q4 third-party units.
- Shares have risen above $336 AH.
- Q4 results, PR
- Update (6:32PM): Amazon is now up 14.2% AH.
Thu, Jan. 29, 4:03 PM
Wed, Jan. 28, 5:35 PM
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Oct. 24, 2014, 5:52 PM
- "Investor pessimism doesn’t seem to dampen [Jeff] Bezos’s appetite for risk. Employees unsettled by Amazon’s (AMZN -8.2%) steadily depreciating stock price are probably the only thing that can force Bezos to slow down," writes BloombergBusinessweek's Brad Stone in the wake of Amazon's Q3 miss and soft guidance.
- Stone, who wrote a popular book on Bezos and Amazon, notes declining employee stock grant values caused by investor angst over Amazon's losses could increase employee turnover, something management is unlikely to ignore. Thus, curbing spending (with the goal of boosting Amazon's shares) could go hand-in-hand with keeping needed employees happy.
- How much could lower spending boost profits? In a much-discussed September post, Benedict Evans estimated Amazon's trailing free cash flow would be around $4B (rather than a current $1.08B) if its capex/sales ratio remained at 2009 levels.
- Nonetheless, Evans defended Bezos' strategy: "Amazon has perhaps 1% of the US retail market by value ... Jeff Bezos’s view is pretty clear: keep investing, because to take profit out of the business would be to waste the opportunity ... The question to ask isn’t whether Amazon is some profitless ponzi scheme, but whether you believe Bezos can capture the future."
- The sell-side was in a less forgiving mood today: Two downgrades arrived (from Cowen and Janney), as did a slew of target cuts. Notably, analysts often expressed more concerns about Amazon's top-line growth slowdown (particularly for media and international sales) than its bottom-line pressures.
- Prior Amazon earnings coverage
Oct. 24, 2014, 12:56 AM
- "Can you tell us or remind us what financial measures are important to you guys ... it's a little hard to see any of them making positive progress," asked Wolfe Research's Aram Rubinson during Amazon's (NASDAQ:AMZN) Q3 CC (transcript), just one of several pointed questions offered.
- Bernstein's Carlos Kirjner asked about weak international margins - international op. loss rose to $224M from $28M a year ago - and why international's growth (14%) has fallen far behind North America's (25%). CFO Tom Szkutak (again) chalked up Amazon's losses to growth investments, and gave little detail about growth other than to state it "has been softer across a number of geographies."
- BGC's Colin Gillis asked why North American media growth (+5%) was the lowest in years. Szkutak mentioned Amazon is seeing a demand shift from textbook purchases to rentals (could be a positive for CHGG), and that heavy discounting last year made for tough comps.
- Total media revenue rose 4% to $5.2B vs. 10% in Q2, and total electronics/general merchandise revenue 26% to $14B vs. 27% in Q2. North American "Other" revenue (mostly AWS) rose 40% to $1.34B, and returned to positive Q/Q growth (15%) following huge price cuts earlier in 2014.
- Other details: 1) $170M in charges were taken, largely related to the slumping Fire Phone. 2) Paid unit growth was 21% vs. 23% in Q2, and 3rd-party sellers made up 42% of units vs. 41%. 3) Gross margin rose 120 bps Y/Y to 28.9%. 4) Fulfillment, tech/content and marketing spend respectively rose to 12.4%, 10.8%, and 4.7% of revenue from 11.5%, 9.2%, and 3.9% a year ago.
- Shares finished AH trading down 10.7%, making new 52-week lows along the way. Not factoring post-earnings estimate revisions, they now trade for 1.2x 2015E sales.
- Q3 results, guidance/details, PR
Oct. 23, 2014, 4:17 PM
- Amazon (NASDAQ:AMZN) reports another unprofitable quarter amid strong growth and a flurry of new device releases.
- North American revenue +24.9% Y/Y to $10.301B
- International revenue +13.6% to $7.712B.
- Media revenue +4.2% to $5.244B
- Other revenue +36.7% to $1.382B.
- Fulfillment spend +29.9% to $2.643B.
- Operating cash flow +15% to $5.71B.
- Guidance: The company sees revenue of $27.3B-$30.3B in Q4 vs. $30.9B consensus. A Q4 operating loss of between -$570M and -$430M is expected.
- AMZN -8.5% AH.
Oct. 23, 2014, 4:03 PM
Oct. 22, 2014, 5:35 PM
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Jul. 24, 2014, 7:35 PM
- "We have a long-term view ... We’re not trying to optimize for short term profits," states Amazon (NASDAQ:AMZN) CFO Tom Szkutak on the Q2 CC, repeating a mantra his company has uttered in some form for years. Judging by the reaction to the company's EPS miss and guidance for a sizable Q3 op. loss, investor patience seems to be wearing thin.
- Szkutak admitted Amazon Web Services' near-term growth has been hurt by an ongoing cloud infrastructure price war with Microsoft and Google - while North American "Other" revenue was up 38% Y/Y, it fell 3% Q/Q, and Y/Y growth decelerated from Q1's 60%.
- He also suggests Amazon's Q3 bottom line will be pressured by a "significant" increase in video content spend. The company plans to spend $100M on original programming alone, as it tries to counter Netflix's big content investments and keep Prime renewal rates high.
- On the bright side, Szkutak says Prime subscriptions are still growing well following this year's $20 price hike, and that Q2 subscriber adds topped year-ago levels (no specific numbers, as usual). CIRP survey data appears to back him up.
- Regarding China, he states Amazon has "a lot of interesting things" planned, and will continue investing in the Middle Kingdom. Alibaba remains the Chinese e-commerce market's 800-lb. gorilla.
- Q2 results, guidance/details.
Jul. 24, 2014, 4:38 PM
- Amazon (NASDAQ:AMZN) expects Q3 revenue of $19.7B-$21.5B (+15%-26% Y/Y) vs. a $20.8B consensus. Op. loss is expected to total $410M-$810M, up from just $25M a year earlier.
- North America revenue rose 26% Y/Y in Q2 to $12B, and international revenue 18% to $7.3B. The growth rates are even with Q1 levels. North America had a $438M segment op. profit, and international a $34M segment op. loss.
- Media revenue +10% Y/Y to $4.8B, a pickup from Q1's 8% growth. EGM revenue +27% to $13.3B, an even growth rate with Q1.
- "Other" revenue +37% to $1.22B, with North American "Other" (dominated by AWS) rising 38% to $1.17B. Amazon claims 90% Y/Y AWS usage growth.
- Gross margin +210 bps Y/Y to 30.7%. Fulfillment spend +15% to $2.38B, marketing +40% to $943M, tech/content +40% to $2.23B. Free cash flow for the trailing 12 months is $1.04B.
- Citi's pre-earnings downgrade was well-timed.
- Q2 results, PR
- Update: North American "Other" revenue, while up 38% Y/Y, fell 3% Q/Q. Major AWS price cuts (came in the wake of big cuts from Google, and were followed by similar cuts from Microsoft) appear to be the culprit.
AMZN vs. ETF Alternatives
Amazon.com Inc is an online retailer. The Company sells its products through the website which provides services, such as advertising services and co-branded credit card agreements. It also offerselectronic devices like Kindle e-readers and Fire tablets.
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