Amazon stock price is up and revenues are in a good shape. Does this mean it is time for investors to focus on this stock?
The US stock market is on the rise and proof of this includes sales that are currently beating estimates from analysts. Amazon.com Inc. (NASDAQ:AMZN), the king of e-commerce, has its stock soaring alongside a huge increase in earnings. Shares have improved up to 10%, a clear indication that investors enjoyed what they learned.
According to a report from Amazon, they have revenue of $17 billion, which is a massive leap of 25% from last year. Aside from that, there are about 9 million new customer accounts for the third quarter alone. This means that there are now over 224 million accounts in Amazon that are currently in use. Even though Amazon has conveyed that they lost $0.12 per share, the company has grown in sales not only in the United States but in other nations as well.
Investors Love Amazon
As previously mentioned, the company has risen in shares and this took place as soon as Amazon announced their earnings report. With an increase in after-hours trading, it does show that investors are pleased with the top-line growth of the company. This is despite the fact that the company has also reported that they have lost some money, or specifically $41 million, during this quarter. In this case, although they did beat expectations of the analysts, they matched the forecasts for the losses this third quarter. The loss is pretty much the same with last year. Nevertheless, the company is concentrating more on revenue growth rather than profitability at the current time.
On the other hand, Amazon did overcome estimates by 2% because of their much stronger sales growth particularly in the electronics and media sections. Investors are applauding AMZN this quarter and there is even more good news for them since there are some other reasons to be happy about this stock. Amazon has a market cap of almost $170 billion, but it is still projected to move upward. Additionally, new studies have shown that less than 10% of consumer spending is devoted to online retail shopping. This gives Amazon plenty of opportunities to boost its earnings once more. Finally, Amazon has a history of reinvesting most of its cash in the trade itself. This is a good move that investors can benefit from because it shows that the company does not just think of the present, but also the future.
Preparing for the Holiday Season
The third quarter is the quarter ahead of the upcoming holiday season in which losses are already expected. Investors are quite relieved that Amazon and the online spending of its customers remain strong. Amazon has positioned itself as a computer service provider, but it is still considered a retailer. Selling computer services to companies has grown almost 60% for Amazon, which has topped the company's product sales growth for about 20%.
Amazon is also making efforts to remain relevant despite the many competitors including Apple's iPad, Google's Android tablets, and Microsoft's Surface. This quarter, Amazon has introduced the updated version of Kindle Fire known as the HDX, which has received mostly positive reviews from critics.
Giving Confidence to Investors
Amazon has issued guidance that promises investors good things for the future. Many analysts have pushed the price target for Amazon, including Mark Mahaney of RBC Capital who increased the AMZN price from $330 to $425. The managing director and analyst of RBC Capital stated that the market opportunity of Amazon appears to be increasingly large. Plus, the track record of the management gives investors the confidence that they need.
The company expects to have net revenue of up to $26.5 billion for the next quarter, which is a 25% growth compared to Q4 of 2012. As for the analysts, they expect that Amazon will report revenue of less than $26 billion for the last quarter of the year.
With Jeff Bezos, Amazon's CEO, spending cash into the delivery network of the company along with Kindle tablets and cloud computing services, growth is no longer worrisome regardless of the near-term profits sacrifice. AMZN just might outperform the e-commerce marketand this is something for the investors to smile about.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.