After the closing bell on Thursday, Amazon reported their record Q1 revenue of $59.7 billion what is 17% of annual rise, and GAAP EPS of $7.09 (up 117%). Revenue was roughly in line with consensus analyst estimates, while EPS beat a $4.70 consensus.
Jeff Bezos’ company also guided for Q2 revenue of $59.5 billion to $63.5 billion (up 13% to 20%) and GAAP operating income of $2.6 billion to $3.6 billion. Revenue guidance compares with a $62.39 billion consensus; operating income guidance, impacted by Amazon’s decision to step up its investment pace, is below a $4.19 billion consensus.
Amazon’s shares, which went into earnings up 27% on the year, finished after-hours trade more than 0.6% higher at $1,913.89.
Amazon’s first quarter revenue:
2019: $59.7 billion
2018: $51.0 billion
2017: $35.7 billion
2016: $29.1 billion
2015: $22.7 billion
2014: $19.7 billion
2013: $16.1 billion
2012: $13.2 billion
2011: $9.9 billion
2010: $7.1 billion
2009: $4.9 billion
2008: $4.1 billion
— Jon Erlichman (@JonErlichman) April 25, 2019
With $12 billion in trailing 12-month net income and a market cap of $919 billion net of cash, it can easily seem that paying 86 times more earnings is just crazy – and you would probably be right.
However, if you compare analysts’ five-year annualized growth rate of 91%, creating a PEG ratio of 0.95, one could also argue AMZN stock presents a value.
Amazon’s stock also trades at 3.7x revenue, compared to Alphabet Inc.’s 5.5x revenue, again arguably creating a value.
Given that Bezos has repeatedly demonstrated Amazon’s ability to execute on just about anything the company launches, betting on long-term success for AMZN stock seems like a sure thing.
Amazon’s chief financial officer Brian Olsavsky said:
“Most of our focus has been on adding more functionality, adding more products and adding reporting for businesses and advertisers so they can understand the incremental customers we’re seeing through advertising with Amazon.
I wouldn’t comment on acceleration or deceleration of growth, I would just say we’re early on in this venture, it’s having a lot of pickup by both both vendors, sellers and also authors we feel like If we work on the inputs in this business and continue to grow traffic to the site, we will have a good outcome in the advertising space.”
He later put the attention back on Amazon Prime, the subscription program that helped make the company the world’s largest online retailer. He said:
“We’re currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program.”
Olsavsky didn’t offer a timeline for the project’s rollout, which will begin in the U.S., saying “we expect to make steady progress quickly and through the year.” He also didn’t outline the extra ongoing costs Amazon will bear to take the program global.
The company’s cloud service division, AWS, which hosts data for companies including Netflix, Unilever, Airbnb, and others continued its solid growth with a 41% sales increase, although that too was a decrease from last year’s 49% growth.
A Lot of Things To Handle in the Future
But not everything is razzle-dazzle in Bezos’s universe. It seems that one of Amazon’s most promising new business areas, advertising sales, appears to be slowing down.
The growth of Amazon’s “Other” segment, which consists primarily of advertising sales, slowed high 36% in the first quarter from the previous year, at $2.72 billion. That’s a quite a slowdown from 97% year-over-year growth last quarter, and over 100% growth for three consecutive quarters before that.
However, maybe one of the biggest defeats for Amazon this quarter was canceling its plans to build an expansive corporate campus in New York City after facing an unexpectedly fierce backlash from lawmakers, and activists, who contended that a tech giant did not deserve nearly $3 billion in government incentives.
Adding to the turmoil, Amazon CEO Jeff Bezos went through a divorce, handing over 25 percent of his stock, worth approximately $35 billion. However, the richest man in the world is keeping his position so far. His current net worth is estimated at $150 billion, according to the Bloomberg Billionaires Index.
Amazon is also limiting its already small presence in China, by closing off its Chinese service to third-party sellers, effectively surrendering its e-commerce footing in one of the biggest markets in the world. All of this means that Amazon and Bezos are at a new point where they have to evaluate their plans and decide what works.