Forex Marketz Daily Forex News – Fully Markets Update
Overnight, the earnings season continued as Amazon.com (AMZN: Nasdaq) released its numbers. Thanks to holiday sales, which climbed 15 percent, the earnings shot through the roof sending the company’s shares soaring nearly 14 percent at one point.
Fourth quarter earnings came in at 45 cents a share. Down from the 51 cents from the year prior. However, analysts expected only 17 cents per share. Revenue jumped 15 percent higher to $29.33 billion. Analysts expected $29.67 billion. Take away the strong Dollar, revenue advanced 18 percent.
Amazon Prime, which $99 per year for annual membership, soared 53 percent higher last year. Membership was up 50 percent in the US and a bit more outside the country for the e-commerce giant. According to CEO Jeff Bezos, in a statement after the earnings release, consumers find Prime membership “the best bargain” out there. The company has paid billions in shipping and invested $1.3 billion into Prime Instant Video.
Operating Income Soars Higher
Operating income for the final quarter of 2014 was up 16 percent to come in at $591 million. The company thinks that first quarter 2015 numbers could take a hit. Why? The strong US Dollar could cause an operating loss of $450 million. In other words operating income cold come in at $50 million for Q1.
For the first quarter, sales should also miss estimates coming in between $20.9 to $22.9 billion. Estimates are in line for $23 billion. Again the Dollar.
What to Do with the Stock?
Even though numbers beat estimates, headwinds are not in favor of the company and investors should consider selling the stock. The fourth quarter was good but future numbers look weaker thanks to Amazon’s weaker exposure outside the US. Especially in emerging markets which will have trouble with a stronger Dollar.
The company is betting on a few things to go right. This includes the Fire TV Sticks, speech recognition device (Echo) and its cloud services. Its cloud service has grown 90 percent to 1 million active customers. Amazon plans to increase investment into this area. However, there will come a point where they cannot build more servers and will start to scale it. More than most likely, cloud servers will become a commodity business. What does this mean? The industry will force out the smaller players as only the companies with scale will be able to offer cloud storage service. If Amazon scales this business by 2017, then we could see its earnings go higher.
Amazon’s stock was down 19 percent last year, as the S&P 500 was up 15 percent. The company is known for very thin margins as the company reinvests earnings heavily into technology and profits.
