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Buy Amazon (AMZN) Stock After Q1 Earnings on 1-Day Shipping Push?

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Shares of Amazon (AMZN - Free Report) popped Friday morning after the company reported better-than-projected Q1 2019 earnings results after the closing bell Thursday. Wall Street also seems excited by the e-commerce giant’s plan to transform its free two-shipping for Amazon Prime members into one-day delivery.

The announcement helped send shares of Walmart (WMT - Free Report) and Target (TGT - Free Report) down through morning trading. With that said, let’s take a look at some of Amazon’s Q1 results and see if AMZN stock looks like a buy right now.

Quick Q1 Overview

Amazon’s Q1 revenue jumped roughly 17% from the year-ago period to hit $59.70 billion, which inched by our $59.69 billion Zacks Consensus Estimate. Investors should note that this top-line growth represented a downturn from the fourth quarter’s roughly 20% expansion, which was already down big compared to Q3 2018’s 29% climb, Q2’s 39% surge, and Q1’s 43% jump. In fact, Q4 2018 was Amazon’s smallest top-line expansion since 2015.

Once again, Amazon’s AWS cloud computing business saw its revenue surge. The key unit jumped roughly 41% to reach $7.69 billion. This, however, marked a slowdown compared to recent periods for the division that drives profits and helps Amazon stand out against cloud peers Microsoft (MSFT - Free Report) , IBM (IBM - Free Report) , and Google (GOOGL - Free Report) .

At the bottom end of the income statement, Amazon blew away Wall Street estimates. The company’s adjusted EPS figure skyrocketed 116.8% to reach $7.09 per share and crush our $4.61 per share estimate. The huge bottom-line beat continued a trend of impressive positive quarterly earnings surprises.

AMZN stock rested up 1.06% at $1,922 per share through morning trading Friday. Overall, shares of Amazon have surged 28% so far this year but still sit around 7% below their 52-week highs.



One-Day Shipping & Growth

Along with Amazon’s earnings beat and in-line revenue growth, Wall Street seems pleased to hear that the company is set to speed up its delivery times for its vital U.S. Prime customers. The move comes as Walmart, Target, Costco (COST - Free Report) , Kroger KR, and other retailers have ramped up their e-commerce and delivery offerings in order better compete with Amazon. CEO Jeff Bezos and executives seem to think the move will help attract more customers to its $119-a year Prime memberships and keep current members loyal as Target and others catch up.

The company said it will spend roughly $800 million to slowly roll out this one-day shipping program in the second quarter. It is important to note that Amazon will continue to offer members the ability to pay for same-day and Prime Now options. “We're currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program,” CFO Brian Olsavsky said on the company’s earnings call.  “We're able to do this because we've spent 20-plus years expanding our fulfillment and logistics network, but this is still a big investment and a lot of work to do ahead of us.”

Amazon’s move to transition from free two-day to one-day shipping is part of its larger push to become a more robust logistics and shipping company. The company will also continue to work with USPS, UPS UPS, and other third-party firms. Looking ahead, our updated Zacks Consensus estimate calls for AMZN’s adjusted second-quarter earnings to jump 22% on 18.2% revenue growth. Meanwhile, the firm’s full-year earnings are projected to pop 32% on similar revenue expansion.



Bottom Line

Amazon has for years tried to expand at a rapid pace. Despite the expansion, e-commerce and cloud-computing are still its core businesses. AWS grabbed approximately 32% of cloud market share last year to help it easily top second-place Microsoft’s 14%. Meanwhile, Amazon is projected to see its share of the total U.S. e-commerce market reach 52.4% in 2019, up from 48% last year.

Amazon is also reportedly set to expand its brick-and-mortar business beyond Whole Foods, bookstores, and its cashierless Amazon Go stores. Plus, AMZN’s digital advertising business is the third-largest in the U.S. behind only Google and Facebook. And Amazon Prime Video is ready to compete alongside Netflix (NFLX - Free Report) , Hulu, and soon enough Disney (DIS - Free Report) , AT&T (T - Free Report) , and Apple (AAPL - Free Report) .

Amazon is a Zacks Rank #2 (Buy) at the moment that rocks an “A” grade for Growth in our Style Score system. On top of all that, the company is now trading at a far more reasonable forward P/E and its 3.9 price/sales ratio marks a massive discount compared to its Chinese counterpart Alibaba’s (BABA - Free Report) 9.3. Overall, Amazon seems like a solid stock to own now and for the foreseeable future.

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