Amazon: Buy or Sell?AMZN) announced first quarter ended March 31, 2016 consolidated net sales of $29.1 billion, up 28 percent year-over-year from $22.7 billion during the same period last year. Going forward, the company estimates second quarter of 2016 total net sales to be in the range of $28.0 billion to $30.5 billion, or year-over-year growth in the range of 21% to 32% over second quarter of 2015.
Amazon.com declared first quarter of 2016 total operating income of $1.1 billion or $1.07 per diluted share, up 320 percent year-over-year from $255 million or $0.12 of diluted loss per share in first quarter of 2015.
The key online retailer reported continued year-over-year expansion in both its top and bottom lines primarily driven by the increased online company sales for the quarter due to a significant expansion in the e-commerce activities during the period.
The continued year-over-year top and bottom line growth for Amazon is mainly due to significant sales of Amazon devices during the quarter and hugely exceeding the sales of several other products. Particularly, the key company customers bought over double the number of Fire tablets compared to the first quarter of 2015.
Amazon is focused on its long-term objective for uniquely optimizing the cash flow from operations and thus, delivered an attractive 101% year-over-year free cash flow growth, offering $6.4 million of free cash flows in first quarter of 2016 compared to $3.2 million in first quarter of 2015. The adjusted free cash flows excluding the lease principal repayments also grew 134% year-over-year to $3.5 billion in first quarter of 2016 compared to $1.5 billion during the same period last year.
The global e-retailer seems hugely focused on driving its online product sales by introducing further innovation in its already advanced products. Also, significant customer traction for Amazon’s superior electronic products has enabled the company to achieve record quarterly profitability while delivering attractive shareholder returns which is in line with its continued commitment to deliver attractive shareholder returns.
The North American operational segment of Amazon is delivering attractive year-over-year consolidated net sales growth and net income from operations growth, primarily due to notable customer traction for the company’s electronic devices which formed the highest selling products on Amazon.com during the period.
Product-wise, Amazon recently launched Kindle Oasis which is the lightest and slimmest Kindle, designed from the basic up for bookworms with an impressively light and thin design, along with a key charging cover included in the package that provides notable battery life for months.
The continued innovation delivering capability of Amazon coupled with attractive discounts available on its website is believed to increasingly attract new customers towards the global retailer, expanding the company’s year-over-year consolidated sales while offering attractive shareholder returns.
Amazon’s historical stock price performance is consistently outperforming the S&P 500 index and Morgan Stanley Technology index which indicates impressive company performance over the years being primarily supported by continued product innovations introduced on a timely basis and thus, hugely attracting several other new customers across the globe.
Overall, the investors are advised to “Buy” equity in Amazon.com, Inc. considering the company’s significant near-term and longer-term growth prospects with a solid PEG ratio of 2.77. Amazon also has a robust balance sheet with an impressive total cash position of $15.86 billion that is comparable to the company’s total debt of $17.61 billion, encouraging the company to make future growth investments. The profit margin of 1.03% also appears satisfactory.
Published on Jul 12, 2016By Subhen Mittra