Amazon.com, Inc. (AMZN) Stock Hits All-Time High on Fantastic Earnings
Amazon.com, Inc. (Nasdaq: AMZN), the world's pre-eminent online retailer, posted earnings after the bell on Thursday, walloping expectations on both the top and bottom line. Amazon stock jumped 6 percent (or by roughly $100 per share), briefly surpassing all-time highs in after-hours action.
A stock on fire, Amazon shares were already up 61 percent in the last year, 25 percent in 2018 and 4 percent on the day, as traders celebrated Facebook's ( FB) earnings beat by bidding shares higher and giddily anticipating the Seattle-based e-commerce giant's report.
And boy, were traders were right to be giddy.
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Amazon earnings: Q1 by the numbers. Are these numbers real? That might be the only question on investors' minds after this phenomenal first quarter. Revenue roared 43 percent higher to $51.04 billion, easily surpassing the $49.87 billion expected by the market.
But Amazon's earnings per share was the real story of the day, as EPS jumped 121 percent to $3.27 per share. Analysts? They were expecting earnings to actually decline year-over-year to $1.25 per share.
When will they learn?
Someone might need to clue in the so-called experts that AMZN stock, at this point, is the closest thing the market has to a perpetual motion machine.
Operating segment highlights: growth everywhere. Amazon Web Services (AWS), the company's high-growth, high-margin earnings machine -- which has been largely responsible for the meteoric rise of AMZN shares -- saw revenue rise 49 percent year-over-year to $5.44 billion. Analysts had expected revenue of $5.26 billion there.
"Growth has trumped profits for Amazon as a whole, with AWS poised to potentially double revenue by 2020; shareholders are willing to overlook P/E ratios in favor of global dominance," says Joel Vincent, chief marketing officer at Zededa, a Silicon Valley-headquartered edge computing startup.
The forward price-to-earnings multiple for Amazon shares was about 94 heading into Thursday's announcement.
As for the brick-and-mortar division (read: Whole Foods), sales at physical stores clocked in at $4.26 billion, better than the $4.14 billion consensus.
Finally, subscription services -- coming on the heels of CEO Jeff Bezos' surprise decision to reveal that there are now more than 100 million Amazon Prime members -- brought in revenue of $3.1 billion, soaring 60 percent year-over-year and clobbering the $2.8 billion Wall Street was looking for.
While not nearly as important to Amazon's business as the cloud or primary retail operations, AMZN is becoming a meaningful force in the digital advertising market. Amazon is seizing more product ads in particular from the likes of Alphabet ( GOOG, GOOGL) and Yahoo.
"Amazon Sponsored Products spend increased 96 percent Y/Y for the median advertiser in Q1," according to Merkle's Q1 2018 Digital Marketing Report. Amazon doesn't yet break out these numbers in full, including this in the "Other" category, which grew by a cool 132 percent to $2.03 billion last quarter.
Spending also "grew by a staggering 128 percent for headline search ads, as advertisers saw much stronger competition for these prominently placed ad units than last year," the Merkle report said.
Unlike the retail business that constitutes the vast majority of Amazon revenue, digital advertising is an area of high margins, so shareholders should be counting their lucky stars these margin-friendly areas like ads and AWS are growing so rapidly.
And there's a reason why: Bezos is a visionary willing to take big risks, and make big investments.
"AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down," Bezos says in the earnings statement.
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Neither has AMZN stock; shares traded above the $1,600 level late Thursday.
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