AMZN - Free Report) stock has fallen over 16% in the last three months as part of the larger market pullback driven by the likes of Apple ( AAPL - Free Report) and other giants. The company’s days of 40% top-line growth might also be over. But let’s dive into Amazon’s overall business picture and outlook to see if investors should buy AMZN stock heading into 2019. Business Overview
Amazon is coming off a third quarter that saw its revenues jump 29% to $56.6 billion. This topped Wall Street estimates, but marked a slowdown compared to the e-commerce giant’s recent growth, including Q2’s 39% surge and Q1’s 43% climb. Amazon’s slowing Q3 revenue growth was likely one of the largest AMZN-specific contributors to its recent decline.
However, slowing revenue growth is something that every company will go through eventually based on the law of large numbers. Instead, investors must decide if there are other things to like about Amazon stock aside from insane top-line expansion.
First off, Jeff Bezos’ firm is projected to capture approximately 50% of the total U.S. e-commerce market in 2018,
up from 44% last year. Plus, Amazon was far ahead of most of its competitors to enter the cloud computing business. This helped it grab the largest portion of the cloud infrastructure services market last quarter at roughly 35%, which blew away second-place Microsoft’s roughly 15%, along with IBM ( IBM - Free Report) , Google ( GOOGL - Free Report) , and Alibaba ( BABA - Free Report) . In fact, Amazon Web Services revenues surged 46% last quarter and 49% in Q2.
On top of all of that, Amazon’s subscription business soared over 50% in each of the past four quarters. Amazon’s subscription unit features monthly fees associated with Amazon Prime membership, along with its audiobook, e-book, digital music, and other non-AWS services.
Clearly, Amazon’s core e-commerce business looks strong at the moment as it continues to shine even as Target (
TGT - Free Report) , Walmart ( WMT - Free Report) , Costco ( COST - Free Report) , Macy’s M, and countless others try to adapt to the modern retail age it helped build. Still, Amazon and Bezos have always looked to expand into new growth areas.
Amazon is expected to become the third-largest digital advertiser behind only Facebook (
FB - Free Report) and Google this year, with its market share projected to grow for years to come as more consumers start their product searches on Amazon.com and its app. Furthermore, Amazon has expanded deeper into the pharmaceutical industry with its PillPack purchase to challenge CVS CVS and Walgreens Boots WBA. The firm has also actively extended its brick-and-mortar footprint through bookstores and its newer cashier-less Amazon Go stores, not to mention Whole Foods.
The tech giant is also poised to expand its live sports offerings through Prime Video, which should help it stand out against Netflix (
NFLX - Free Report) and soon enough Disney ( DIS - Free Report) , Apple, and AT&T ( T - Free Report) in an entertainment world that is headed toward what could be a completely streaming future. Let’s also not forget that Amazon has become a much more profitable company in recent years, with this trend set to continue (also read: Why Amazon is Ready to Spend Billions on Live Sports in the Streaming Age). Q4 & Fiscal 2019
Looking ahead, Amazon’s fourth-quarter revenues are projected to jump 18.5% to reach $71.61 billion, based on our current Zacks Consensus Estimate. Meanwhile, the firm’s fiscal 2018 revenues are expected to surge 30.8% to reach $232.69 billion. Peeking ahead to fiscal 2019, Amazon’s top line is projected to reach $280.4 billion, which would mark a 20.5% jump above our 2018 estimate.
At the bottom end of the income statement, Amazon’s adjusted fourth quarter revenues are projected to skyrocket 153.7% to reach $5.48 per share. AMZN’s full-year earnings are also expected to soar 328.6%, with fiscal 2019’s EPS figure projected to come in 37% higher.
Amazon’s price movement chart does show us something many investors already know: AMZN stock has been a monster. Instead, investors should note Amazon’s early 2015 drop off that now looks like nothing more than a blip on the radar.
Therefore, with Amazon currently trading at roughly 19% below its 52-week high, now might not be a bad time to think about buying AMZN stock as we head into the new year.
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