Amazon earnings beat, guidance disappoints

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Amazon (AMZN) reported strong fourth-quarter results, with earnings smashing expectations and revenue also stronger than expected. But first-quarter guidance came in a bit light of estimates.

EPS came in at $6.04 on revenue of $72.4 billion, compared to expectations of $5.65 per share on $71.61 billion in revenue. This represents a 20% increase in revenue from a year ago, but it’s at the slowest pace in three years.

After some fluctuation, shares of Amazon sold off after the report.

Amazon had dubbed this holiday season the strongest in the company’s history just weeks ago, and investors were likely anticipating solid results.

Sales increased in all but one of Amazon’s five categories. Physical stores, which is primarily comprised of Whole Foods, saw a 3% decrease in revenue year-over-year.

Amazon Web Services saw 46% year-over-year growth, which is in line with previous quarters.

Percentages are a percentage of overall revenue. Source: David Foster/Yahoo Finance
Percentages are a percentage of overall revenue. Source: David Foster/Yahoo Finance

“Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year,” Amazon CEO Jeff Bezos said in a press release.

Prior to Amazon’s earnings release, analysts at SunTrust Robinson Humphrey suggested that the company’s own estimates, particularly in the fourth quarter, aren’t always impressive.

“History shows that Amazon has had limited success in exceeding Street expectations for revenue in 4Q, likely due to the lack of visibility at the time guidance is given, and difficulties in forecasting a high amount of sales volume in such a small window,” Suntrust analysts wrote in a note to clients.

The company has only recently exceeded analyst expectations during the fourth quarter. Prior to Q4 of 2017, the last time Amazon beat consensus estimates was in 2009, according to SunTrust.

Amazon first broke out how many customers actually pay for Prime membership in April 2018 — a whopping 100 million. According to Stifel’s estimates, more than half of U.S. households now have a Prime account.

Shares of Amazon are up around 17% over the last year. Analysts surveyed by Factset have an average price target of $2,140 on the company. Google parent Alphabet will be the last FAANG stock to report fourth-quarter results on Monday, February 4.

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