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Bull of the Day: Amazon (AMZN)

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Headquartered in Seattle, WA, Amazon.com, Inc. (AMZN - Free Report) is one of the largest online retailers in the world, with extensive operations in North America, and strong expansion across the globe.

The company, founded by Jeff Bezos in July 1994, went public in May 1997. It currently operates through the following segments: North America, International, and Amazon Web Services (AWS).

Exceptionally Strong Q1 Results and Guidance

The retail behemoth's Q1 results trounced street expectations. Adjusted earnings soared 121% year over year to $3.27 per share and were significantly ahead of the Zacks Consensus Estimate of $1.22.

Net Sales rose 43% year over year to $51.04 billion, beating the Zacks Consensus Estimate of $50.17 billion and the management’s guided range of $47.75-$50.75 billion.

AWS revenues surged 48.6% year over year to $5.44 billion, thanks mainly to expanding customer base.

“AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,” said Bezos.

“As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That’s why you’re seeing this remarkable acceleration in AWS growth, now for two quarters in a row.”

AWS now accounts for ~11% of Amazon’s total revenue and ~73% of its operating income. It has a 33% share of the global cloud computing services market, while its closest rival Microsoft has 13% market share.

Shares surged about 7% in the after-hours trading to a new all-time high and are now up almost 50% this year.

Amazon is currently the second most valuable company in the world, after Apple. It remains to be seen whether it can beat Apple to become the first $1 trillion company.

Prime Membership Exceeds 100 Million

Earlier in April, the company had announced that it has more than 100 million Amazon Prime members globally. This was for the first time the company announced the number of Prime members.

Prime members enjoy free, unlimited two-day shipping, access to free music, movies and videos, and other perks. The membership fee was increased to $119 per year, recently.

Prime members now also get free two-hour delivery for Whole Foods orders over $35 in a number of cities, and 10% discounts on sale items at Whole Foods.

The company recently launched Prime Wardrobe, a “try before you buy” shopping service for its in-house as well as many designer brands.

Prime members tend to spend more on Amazon. Per Consumer Intelligence Research Partners, Prime members in the US spend $1,300 a year, while non-Prime members spend about $700.

Soaring Estimates

After an exceptionally strong quarterly report, analysts have significantly raised their estimates for the company.

Zacks Consensus Estimates for the current and the next fiscal year have jumped to $12.74 per share and $20.30 per share respectively, from $8.69 per share and $15.73 per share, before the results.  The company has beaten Zacks Consensus Estimate in three of last four quarters, with an average quarterly surprise exceeding 1300%.

Amazon.com, Inc. Price, Consensus and EPS Surprise

Amazon.com, Inc. Price, Consensus and EPS Surprise | Amazon.com, Inc. Quote

Bottom Line

Amazon was well known for not caring for short-term profits and instead focusing on longer-term investments. It invested heavily in multiple platforms and has now started reaping the benefits of all those investments made over the years.

Further, the company is fast expanding in international markets with huge untapped potential, which will be significant drivers of revenue and margin growth in the coming years.

 

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Disclosure: I own shares of AMZN in my personal trading portfolio.




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