Amazon Whipsaws After Reporting Fourth-Quarter Earnings

January 31, 2019

By Chloe Aiello | Cheddar.com

Amazon whipsawed after the bell, first surging and then erasing its earlier gains, after beating Wall Street expectations on its top and bottom lines, but reporting weak outlook.

Bolstered by a strong holiday season, Amazon ($AMZN) beat the Street’s estimates for the first time in two quarters. Its previous misses invited suspicion the e-commerce giant’s growth was slowing even as competition heats up with rivals like Walmart domestically and Alibaba abroad.

Amazon reported earnings per share of $6.04 on revenue of $72.4 billion, beating the $5.68 EPS on $71.87 billion in revenue analysts were expecting, according to Thomson Reuters. Overall revenue climbed close to 20 percent year-over-year.

Despite its top and bottom lines beats, its revenue growth has actually decelerated. Last year, its year-over-year revenue growth rate was almost twice the rate Amazon reported this quarter. And it looks like Amazon anticipates that trend will continue next quarter.

Next quarter, Amazon said it anticipates net sales to fall between $56 billion and $60 billion ー an increase of between 10 to 18 percent year-over-year. Revenue in the first quarter is typically lower than holiday revenue, but the first quarter of 2018 saw a growth rate of 43 percent year-over-year.

“Very good beat for 2018, but in the record-breaking cold weather, Amazon should have had a much bigger beat, much stronger guidance. And guidance is disappointing,” Burt Flickinger, a retail expert from Strategic Research Group, told Cheddar.

Amazon has in recent years seen wider margin businesses like cloud, advertising, and its marketplace flourish, CNBC reported. But those businesses tend to have lower sales, meaning less overall revenue.

Amazon reported $7.43 billion in revenue for its cloud services sector, Amazon Web Services ー a jump of 45 percent since last year, when it reported $5.11 billion in revenue. Growth in AWS is key, especially in light of concerns over slowed growth in the cloud industry.

Uncertainty about Microsoft’s Azure dragged on its earnings on Wednesday, following comments from chipmakers and equipment suppliers that business from cloud customers had slowed amid uncertain global economic conditions.

Amazon also said sales from advertising services and other related services came in at $3.39 billion ー almost doubling last year’s revenue.

“It wasn’t more than seven, eight years ago that AWS was this new kind of business emerging in Amazon. Advertising could be the next flywheel that really starts to make Amazon go to back to that high of $2 000 a share,” said Christian Magoon, CEO of Amplify ETFs.