Amazon: a Screaming Buy?

Amazon.com (AMZN) announced fourth quarter ended December 31, 2015 net sales of $35.7 billion, up 22 percent year-over-year from $29.3 billion during the same period last year. Going forward, the company estimates first quarter of 2016 net sales to grow year-over-year in the range of 17% to 28% and record net sales in $26.5 billion to $29.0 billion range compared to first quarter of 2015.

Amazon declared fourth quarter of 2015 net income of $482 million, or $1.00 per diluted share as against $214 million, or $0.45 per diluted share during the fourth quarter of 2014.
Further, Amazon has provided operating income guidance for first quarter of 2016 and estimates it to be in $100 million to $700 million as against $255 million during the first quarter of 2015.

The global retailer reported continued year-over-year growth in both its top and bottom lines primarily driven by notable increase in company’s online sales.

What next?   

Moving ahead, the continued and significant year-over-year growth in Amazon’s top line is expected to continue over the long-term mainly due to the highest gains that are estimated to be achieved from the company’s cloud computing part of business focused on enterprise clients.

Amazon illustrated excellent overall performance for the fiscal year 2015 with its stock rising over 122% compared to a 7% increase observed in NASDAQ, which is a clear turnaround from fiscal 2014 when Amazon declined -23% compared to NASDAQ growing over 15%. This remarkable company performance is primarily driven by the management’s continued and only focus on delivering sustainable long-term expansion.

The worldwide retailing giant is well-positioned for delivering sustainable long-term growth given, rising customer traction for Amazon’s innovative set of cloud computing solutions for enterprises.

Impressive growth drivers  

The rapid year-over-year growth in both the company’s top and bottom lines is driven by expanding sales for several of Amazon’s key items including, Fire TV that was recognized as the top highest-selling media player in US and it had already added more than 1,000 fresh apps, new games and channels since September that includes, Watch Travel Channel, Watch Food Network, Watch HGTV, NBC and NBC Sports, growing sales for the innovative and strategically priced $50 Fire tablet.

The uniquely developed Alexa Voice Services and Alexa Skills Kit increasingly draw new companies, with Ooma, Alarm.com, Vivint, Invoxia and Ford declaring their intentions to consolidate their innovative set of key products and related services with Alexa. Moreover, Alexa is getting even better with attractive features that include modified sports updates, innovative alarm tones, greater IFTTT support, news contributions from Bloomberg and CNN and confined search through Yelp.

The newer products and services being introduced by Amazon for both the individual and enterprise customers through strategic collaboration with other key services companies is believed to drive much deeper and wider company growth among other ecommerce companies.

Net sales for Amazon’s AWS segment grew 69 percent year-over-year to $2.41 billion in fourth quarter of 2015, compared to $1.42 billion in fourth quarter of 2014. Similarly, Amazon’s net income from operations grew 186 percent year-over-year to $687 million in fourth quarter of 2015, compared to $240 million during the same period last year.

Conclusion

Overall, the investors are advised to “Buy” equity in Amazon.com considering the company’s solid long-term growth prospects coupled with strong financial position with significant total cash of $19.81 billion against smaller total debt position of $17.55 billion, encouraging the company to continue to make future growth investments. The profit margin of 0.56% seems satisfactory. The PEG ratio of 3.05 suggests healthy company growth, marginally better than the industry’s growth average of 0.50.
Published on Mar 17, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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