Cloud Services

Amazon Soars but Investors Sulk

Despite topping $100 billion revenue, including explosive growth for AWS, Amazon failed to achieve analyst expectations Thursday, and Wall Street punished it.

AWS was a high flyer for Amazon.com Inc. (Nasdaq: AMZN) in the fourth quarter, with net sales of $2.4 billion, up 69% year-over-year, according to results reported Thursday. (See Amazon.com Announces Q4 Sales up 22% to $35.7B.)

Operating income for AWS was $687 million, up 186% year-over-year.

Overall, for all of Amazon's business net sales increased 22% in the fourth quarter to $35.7 billion, with net income $482 million in the fourth quarter, or $1 per diluted share, compared with $214 million or $0.45 per diluted share in the year-ago quarter.

For the full year, net sales were up 20% to 107 billion, and net income of $596 billion or $1.25 per diluted share, compared with net loss of $241 million or $0.52 per diluted share in 2014.

For the first quarter of 2016, Amazon expects net sales of $26.5 billion to $29 billion, up 17% to 28%, with operating income of $100 million to $700 million, compared with $255 million in the first quarter of 2015.

With all that good news, why the frowny faces on Wall Street? Analysts predicted a profit of $1.56 per share on revenue of $36 billion. Shares were down 14% in after-hours trading, to $548.90, after closing at $635.35, up about 9% on the day's trading.

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In its earnings press release, Amazon reviewed a parade of highlights showing the company's increasing dominance in cloud and video, including:

  • Launch of its AWS Asia Pacific (Seoul) Region in Korea and plans to open a new region in Canada.
  • General availability for Amazon WorkMail, a business email and calendaring service.
  • General availability of AWS IoT, a managed cloud platform for connected device messaging and processing.
  • Fire TV is the best-selling streaming media in the US.
  • The cloud-based Alexa Skills and Alexa Voice Service partners with companies including Ford, Fidelity, CNN and Bloomberg to provide voice and information services, for the Amazon Echo and enabled devices.
  • Prime Video doubled streaming international customers compared with the fourth quarter of 2014.
  • Amazon partnered with Showtime, Starz and other video channels to offer streaming programming.

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— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected]

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DHagar 2/9/2016 | 5:59:04 PM
Re: Oh, those analysts seven, thanks - good information and analysis!
brooks7 2/9/2016 | 5:29:07 PM
Re: Oh, those analysts I would say that based on the current price that Amazon stock is massively overvalued and one would expect only perfect exection to be acceptable.  A quick check showed that the PEG ratio on Amazon stock is 2.6 or so.  A PEG of 1 is a pretty average valuation - one that does not imply much risk in the valuation. 

My point of all of this is that a good company is not necessarily a good investment based on the current valuation of the stock.  That means little to the ongoing growth of the business itself.  Which is the point of separating out the investor view from the overall business prospect.  A relatively good stock price would be say $185/share.


DHagar 2/9/2016 | 2:42:02 PM
Re: Oh, those analysts Seven, excellent information on the stock value.  So that was my initial question, is this assessment a valid one and a good prediction of falling Amazon value, or is it just playing the bets and the power of Wall Street?  In other words, is the Amazon stock still capable of producing the same level of value?

Note:  Producing cash is not necessarily the same as producing value.
DHagar 2/9/2016 | 2:35:50 PM
Re: Oh, those analysts Joe, good analysis.  As long as Amazon can produce in the long-run, they will do well.  They have invested in growth, but if they can deliver, that's all that counts.  Without question they have always had a specific focus and clearly have led the competition.
brooks7 2/9/2016 | 1:26:44 PM
Re: Oh, those analysts
Forward P/E (1 yr): 56.28


That is the reason that the company is not growing in stock price....



PS - You need to understand the difference between a good investment and a solid performance from a company.  You buy low - aka when the stock is valued less than the business will be worth.  You sell high - aka when the stock is highly valued.  A supremely high P/E is often a sign that the company's stock is fully price.  That means there is no point in buying it as the stock price won't rise from its current value unless there is a significant growth in Earnings.  So, people sell the stock and thus the law of supply and demand lowers the stock price.


Joe Stanganelli 2/9/2016 | 1:06:17 PM
Re: Voxsplain @Mitch: That's the way you do capitalism -- as Looney Tunes taught me many years ago in Yankee Dood It.
Joe Stanganelli 2/9/2016 | 1:03:06 PM
Re: Oh, those analysts I think Amazon is one of those very few publicly traded companies that are run without giving much of a darn about short-term investors' constant demands for ever-higher quarterly returns ad inifinitum.  Bezos and his board are in it for the long-term; rather than becoming lazy like Yahoo did (allowing Google to take over search -- and almost everything else in the Valley), the company is strategizing like a hungry startup.

For long-term investors, that's good.
Mitch Wagner 1/31/2016 | 12:10:18 PM
Voxsplain Amazon explained in one chart. It's spending all its revenue on growing the business, with near-zero profits since its founding more than 20 years ago
DHagar 1/29/2016 | 5:17:19 PM
Re: Oh, those analysts @Joe, good point!  Those winners/losers games usually do produce more losers.

Do you agree with the Analysts on Amazon or are they just "feeling their oats"?
Joe Stanganelli 1/29/2016 | 9:10:07 AM
Re: Oh, those analysts @Mitch: Ehhhh, to be fair, the horse loses too once it loses enough races.
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