Company Reports

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.

Amazon dominates its served markets, notably for e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader given its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the firm continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high-margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services, which result in a powerful virtuous circle where customers and sellers attract one another. The Kindle and other devices further bolster the ecosystem by helping attract new customers, while making the value proposition irresistible in retaining existing users.

Amazon dominates its served markets, notably e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader thanks to its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the company continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high-margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services; this results in a powerful virtuous circle where customers and sellers attract one another. Kindle and other devices further bolster the ecosystem by helping attract new customers while making the value proposition irresistible in retaining existing customers. Through Amazon Web Services, Amazon is also a clear leader in public cloud services.

Wide-moat Amazon reported good third-quarter results and provided better-than-expected guidance for the fourth quarter. Profitability was strong and is expected to remain healthy in the near term. While e-commerce was solid and continues to rebound, Amazon Web Services optimization has stabilized, although growth fell slightly shy of our expectations. Still, commentary was encouraging about AWS improving further over the next several quarters. Continued operational improvements brought on by the move to regional hubs have resulted in better operating leverage than anticipated. We still envision healthy long-term growth driven by e-commerce proliferation, AWS, and advertising, and believe the biggest near-term issue remains the health of the consumer rather than business spending on the cloud. After increasing our profitability assumptions modestly based on results and guidance, we are increasing our fair value estimate to $155 per share, from $150 previously, and see shares as attractive.

We are maintaining our fair value estimate of $150 per share for wide-moat Amazon as the U.S. Federal Trade Commission, or FTC, was joined by 17 state attorneys general in filing a lawsuit against the company for a variety of alleged anticompetitive practices. Our initial opinion is that a settlement is the most likely outcome, with a fine being levied and possibly some minor changes in business practices, and we are highly skeptical that Amazon will be broken up. Shares still appear modestly undervalued to us.

Amazon dominates its served markets, notably e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader thanks to its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the company continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high-margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services; this results in a powerful virtuous circle where customers and sellers attract one another. Kindle and other devices further bolster the ecosystem by helping attract new customers while making the value proposition irresistible in retaining existing customers. Through Amazon Web Services, Amazon is also a clear leader in public cloud services.

Wide-moat Amazon reported strong second-quarter results and provided better-than-expected guidance for the third quarter. E-commerce and advertising drove most of the upside, but Amazon Web Services revenue stabilized and came in better than feared with a more upbeat outlook. Operational improvements continue apace and propelled the firm to its strongest operating margin in the last two years. We still envision healthy long-term growth driven by e-commerce proliferation, AWS, and advertising and believe the biggest near-term issue is the health of the consumer rather than business spending on the cloud. After increasing our growth and profitability assumptions based on results and guidance, we are increasing our fair value estimate to $150 per share from $137 and see modest upside for the stock.

Wide-moat Amazon reported good first-quarter results and provided guidance for the second quarter that was better than we were anticipating. E-commerce was solid and advertising was resilient, and we applaud the operational improvements that drove higher margins, while on the downside, Amazon Web Services continues to decelerate. We still envision healthy long-term growth driven by e-commerce proliferation, AWS, and advertising even as the near term remains a bit of a work in progress. Further, macroeconomic issues are sending mixed signals, with pressure in the U.S. and improving conditions in Europe. We are maintaining our fair value estimate of $137 per share and still view shares as attractive.

Wide-moat Amazon reported solid fourth-quarter results but provided a first-quarter outlook that was shy of our expectations. E-commerce was generally solid while Amazon Web Services continues to decelerate, including through January. We see real progress being made on the operational side, which was masked by impairment charges. We still foresee healthy long-term growth driven by e-commerce proliferation, AWS, and advertising, but the near term remains a work in progress with macro issues weighing on 2023, albeit with improvement in 2024. We cut our estimates on the top and bottom lines for 2023 while leaving the rest of our estimates largely unchanged. In turn, we cut our fair value estimate to $137 per share from $150. Still, we see the shares as attractive.

Amazon dominates its served markets, notably e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader thanks to its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the company continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high-margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services; this results in a powerful virtuous circle where customers and sellers attract one another. Kindle and other devices further bolster the ecosystem by helping attract new customers while making the value proposition irresistible in retaining existing customers. Through Amazon Web Services, Amazon is also a clear leader in public cloud services.

Amazon reported disappointing third-quarter results and provided investors with soft fourth-quarter guidance, with the performance of AWS being our greatest near-term concern. This quarter stings, as this was supposed to be the quarter where Amazon had finally lapped pandemic-fueled issues. We continue to believe long-term growth driven by e-commerce proliferation, AWS, and advertising, but the near term is clouded by a variety of macroeconomic issues, including currency headwinds, high inflation, soaring energy costs, and deceleration in AWS. We can look through these issues but we believe they are likely to persist throughout 2023, which decreases our confidence over the medium term as well. We are lowering our growth and profitability assumptions, and in turn our fair value estimate drops to $150 per share, from $192 previously. Still, we are not ready to throw in the towel on Amazon and we see shares as attractive, but clearly the company has still not found stable footing on its path out of the pandemic.

Amazon dominates its served markets, notably e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader thanks to its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the company continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high-margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services; this results in a powerful virtuous circle where customers and sellers attract one another. Kindle and other devices further bolster the ecosystem by helping attract new customers while making the value proposition irresistible in retaining existing customers. Through Amazon Web Services, Amazon is also a clear leader in public cloud services.

Amazon reported good second-quarter top-line and bottom-line results which were ahead of FactSet consensus expectations and provided an encouraging revenue outlook for the third quarter. While AWS remains a tremendous opportunity and performed well once again, the more important takeaway this quarter is that retail-related businesses, especially third-party seller services, are coming back and even delivered some upside compared with our expectations. We are not ready to declare victory for the company just yet, but we are encouraged by results and note that the pandemic-fueled growth surge is now removed from prior-year comparisons, so growth should optically improve going forward.

Amazon dominates its served markets, notably e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader thanks to its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the company continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high-margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services; this results in a powerful virtuous circle where customers and sellers attract one another. Kindle and other devices further bolster the ecosystem by helping attract new customers while making the value proposition irresistible in retaining existing customers. Through Amazon Web Services, Amazon is also a clear leader in public cloud services.

Amazon dominates its served markets, notably for e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader given its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the company continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services, which result in a powerful virtuous circle where customers and sellers attract one another. The Kindle and other devices further bolster the ecosystem by helping attract new customers, while making the value proposition irresistible in retaining existing customers. Through Amazon Web Services (AWS), Amazon is also a clear leader in public cloud services.

We are lowering our fair value estimate to $3,850 per share, from $4,100, for wide-moat Amazon after it reported a mixed quarter and issued worse than expected guidance for the second quarter. The highlight of results was strength in AWS, which continues to benefit from the ongoing shift of enterprise workloads to the cloud. While revenue was ahead of the guidance midpoint, first-party sales suffered its second straight quarter of year-over-year contraction, which we believe is a first but is not a surprise. Operating margin was a concern, as inflation, excess labor, and excess capacity ate into profitability, which came in just above the low end of guidance and was well short of our expectations. Meanwhile, second-quarter guidance is well short of our model, as we think profitability challenges will linger for a couple of quarters and perhaps into next year; Prime Day will move into the third quarter, and demand levels have not yet normalized post-COVID-19. While we expect the second half of the year to show improvements, we modestly lowered our growth and profitability estimates, particularly in the near term, to account for guidance and heightened uncertainty.

Amazon dominates its served markets, notably for e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader given its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the company continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services, which result in a powerful virtuous circle where customers and sellers attract one another. The Kindle and other devices further bolster the ecosystem by helping attract new customers, while making the value proposition irresistible in retaining existing customers. Through Amazon Web Services (AWS), Amazon is also a clear leader in public cloud services.

We are maintaining our fair value estimate for wide-moat Amazon at $4,100 per share, and despite shares rising 14% after hours, we still view shares as undervalued. We think the highlight of the quarter was Amazon's plan to raise prices in the U.S. on Prime to $139 from $119, beginning on Feb. 18 for new members, underscoring Amazon's pricing power and highlighting Prime as a revenue driver. Meanwhile, Amazon will continue to invest heavily in Amazon Web Services, or AWS, fulfilment capacity and delivery, although we see these beginning to ease in the second half of 2022. Overall, we do not see issues with the long-term story as Amazon remains well positioned to prosper from the secular shift toward e-commerce and the public cloud over the next decade.

Amazon dominates its served markets, notably for e-commerce and cloud services. It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader given its size and scale, which yield an unmatched selection of low-priced goods for consumers. The secular drift toward e-commerce continues unabated with the company continuing to grind out market share gains despite its size. Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high margin recurring revenue from customers who purchase more frequently from Amazon’s properties. In return, consumers get one-day shipping on millions of items, exclusive video content, and other services, which result in a powerful virtuous circle where customers and sellers attract one another. The Kindle and other devices further bolster the ecosystem by helping attract new customers, while making the value proposition irresistible in retaining existing customers. Through Amazon Web Services (AWS), Amazon is also a clear leader in public cloud services.

We are lowering our fair value estimate for wide-moat Amazon to $4,100 per share from $4,200, based mainly on margin pressures arising from hiring and shipping challenges, which we think may pressure profitability in the near term and, to a lesser extent, the long term. That said, we see shares as attractive. Amazon reported third-quarter results that came in above the midpoints of its guidance range for both revenue and operating income but were still shy of investor expectations. Guidance for the fourth quarter was modestly below our expectations but has little bearing on our long-term view. Meanwhile, the company continues to rapidly add capacity in order to meet customer demand and one day delivery, even as it roughly doubled its footprint during the past two years. We don’t see issues with the long-term story as Amazon remains well positioned to prosper from the secular shift toward e-commerce and the public cloud over the next decade, but we do see a modest reset in terms of growth and profitability through the next several quarters.