Amazon.com ( AMZN Quick Quote AMZN - Free Report) reported first-quarter 2021 earnings of $15.79 per share, beating the Zacks Consensus Estimate by 61.9%. The bottom line also improved 215.2% from the year-ago quarter and 12.1% from the previous quarter. Net sales of $108.52 billion comfortably surpassed the Zacks Consensus Estimate of $105.23 billion and exceeded management’s guidance of $100-$106 billion. Further, the figure increased 44% on a year-over-year basis but went down13.6% sequentially. North America revenues (59% of sales) rose 40% from the year-ago quarter to $64.4 billion. International revenues (28% of sales) climbed 60% year over year to $30.6 billion. Amazon Web Services (“AWS”) revenues (12% of sales) rose 32% year over year to $13.5 billion. Strong momentum across Prime members remained a tailwind. Currently, the Prime member base stands above the 200-million mark. The company’s subscription services delivered a robust performance in the reported quarter. Sales from these services went up 36% from the prior-year quarter. Further, the coronavirus pandemic-led continuous surge in online shopping contributed well.We note that the company’s online store sales rose 44% from the prior-year quarter. Additionally, strengthening relationships with third-party sellers remained a major positive. In the first quarter, sales generated by third-party seller services rose 64% on a year-over-year basis. Furthermore, solid AWS momentum and strengthening smart devices offerings continued to benefit the company’s first-quarter performance. Also, favorable foreign exchange rates drove top-line growth well. Coming to price performance, Amazon has returned 54.6% over a year, outperforming the industry’s rally of 18.3%. The company’s strong global presence, growing Prime momentum, robust data center network and an increasing number of AWS regions, improving Alexa skills, expanding smart devices portfolio, and growing efforts toward gaining strong traction among small and medium businesses are likely to drive its near-term financial performance.
Retail & Prime Momentum
Amazon’s aggressive retail strategies continued to aid its first-quarter results. Expanding the fulfillment network and ultrafast delivery services remained tailwinds.
Strengthening momentum across Amazon’s last-mile network of delivery driver partners remained noteworthy. The company made its Same-Day Delivery service free for orders above $35 in selected cities of the United States. Additionally growing momentum across Prime Wardrobe on the back of personalized features remained noteworthy. Further, the rising number of Amazon Fresh grocery stores across the United States contributed well. Coming to the international footprint, the expansion of Discover Rooms to countries, namely Canada, France, Germany, India, Italy, Japan, Spain, the U.K., and the United States, was a positive. Further, the company opened three Amazon Fresh locations in London, which are based on the Just Walk Out technology. Apart from this, growing momentum across Prime Video and Amazon Studios contributed well to the first-quarter results. The reported quarter marked the first quarter in which Amazon Studios won theGolden Globe award from the Hollywood Foreign Press Association. In addition to this, it achieved 12 Academy Award nominations. Further, expanding original content and overall content portfolio on Prime Video continued to accelerate the Prime engagement further. We note that Prime Video premiered Coming 2 America, which was at the top among the most-streamed movies in its opening week. Additionally, new Amazon Originals like Invincible, The Stand in Canada, Guerra de Likesin Mexico,The Great Escapists in the U.K., La Templanza in Spain, and We Children from Bahnhof Zoo in Germany aided the company in bolstering its reach to regional streamers. Along with these, expanding live sports content on Prime Video continued to expand its viewer base. Expanding AWS Portfolio: A Key Catalyst
AWS, which witnessed solid growth in the topline, continued to gain strong customer momentum in the first quarter, courtesy of its highly reliable services portfolio.
In the first quarter, AWS announced the general availability of Amazon Lookout for Metrics, which detects anomalies in business metricswith the help of Machine Learning (ML) technology. Furthermore, the company made Amazon Lookout for Vision generally available, which processesseveral images in an hour to detect defects and anomalies in manufactured products. Additionally, AWS unveiled One Zone storage classes for Amazon Elastic File System or Amazon EFS, which provides lifecycle management and integration with computing services. Additionally, the company made X2gd instancesfor Amazon Elastic Compute Cloud or Amazon EC2 generally available. Coming to regions and Availability Zones, the company launched a second full region in Japan — the AWS Asia Pacific (Osaka) Region — in the first quarter. Notably, AWS has 80 Availability Zones across 25 geographic regions. On the heels of the expanding services portfolio, regions and Availability Zones, AWS experienced strong growth in its clientele with the addition of PGA TOUR— commonly known as TOUR, which selected AWS as its official cloud provider. Furthermore, National Hockey League partnered with AWS to make the latter its official cloud, AI and ML infrastructure provider. Robust Smart Devices Portfolio
Amazon’s robust portfolio of Echo smart speakers remained beneficial. Further, strengthening Alexa features have aided the company in delivering a better user experience.
Apart from this, its strengthening offering of Wi-Fi devices and robust smart home security camera portfolio contributed well. Quarter in Detail
Product sales (53% of sales) increased 37.4% year over year to $57.5 billion. Service sales (47% of sales) rose 51.8% from the year-ago quarter to $51.03 billion.
Operating expenses were $99.6 billion, up 39.4% from the year-ago quarter. As a percentage of revenues, the figure contracted 290bps on a year-over-year basis to 91.8%. Cost of sales, fulfillment, technology & content, marketing, and general & administrative expenses increased 41%, 43.4%, 33.9%, 28.6% and 36.8% to $62.4 billion, $16.5 billion, $12.5 billion, $6.2 billion and $1.9 billion, respectively, on a year-over-year basis. Other operating expenses were $38 million in the reported quarter, down from $70 million in the year-ago quarter. Overall operating income increased 122.2% from the year-ago quarter to $8.9 billion. Further, the operating margin expanded 290 bps from the year-ago quarter to 8.2%. Operating income for AWS was $4.2 billion, up 35% year over year. Further, the same for North America improved 163% from the prior-year quarter to $3.4 billion. Further, the International segment reported an operating income of $1.3 billion against a loss of $398 million in the year-ago quarter. Balance Sheet & Cash Flow
As of Mar 31, 2021, cash and cash equivalents were $33.8 billion compared with $42.1 billion as of Dec 31, 2020. Further, marketable securities totaled $39.4 billion at the end of the first quarter, down from $42.3 billion at the end of the fourth quarter.
Long-term debt was $31.9 billion in the reported quarter compared with $31.8 billion in the previous quarter. Further, the company generated $4.2 billion of cash from operation in the first quarter, which was significantly down from $30.4 billion in the prior quarter. On a trailing 12-month basis, free cash flow was $26.4 billion in the reported quarter, down from $31.02 million in the prior quarter. Guidance
For second-quarter 2021, Amazon expects net sales between $110 billion and $116 billion. The figure is anticipated to improve 24-30% on a year-over-year basis. The Zacks Consensus Estimate for net sales is pegged at $108.03 billion.
Management projects a favorable foreign exchange impact of 200 bps. Income from operational activities is likely to range from operating income of $4.5 billion to $8 billion. The guidance is inclusive of $1.5 billion costs related to COVID-19. Zacks Rank & Stocks to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
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