Amazon Earnings: Advertising Shines, E-Commerce Is Still Improving, and Margins Are Impressive

Wide-moat Amazon reported strong fourth-quarter results and offered a mixed outlook relative to our expectations, including in-line revenue and better profitability. Improvements in fulfillment and cost to serve continue to drive stronger-than-anticipated profitability in retail. Segment results were good overall, with advertising coming in the strongest relative to our model. After several quarters of strong performance on the profitability front, we are raising our operating margin outlook by 160 basis points for 2024 and similar margin expansion over the next several years. In turn, we raise our fair value estimate to $185 from $155. After a strong run in the shares over the last year, we see the stock as fairly valued.