10 Updates

Amazon Falls on High Spending, But Topline Growth Remains Strong

Apr 29 2014, 8:04am CDT | by

Amazon recently released its Q1 2014 earnings and based on the disclosed financials, we have updated our price estimate to $341 . Our current price estimate implies more than 10% premium to the...

Filed under: news

 
 
 

12 weeks ago

Amazon Falls on High Spending, But Topline Growth Remains Strong

Apr 29 2014, 8:04am CDT | by

Amazon recently released its Q1 2014 earnings and based on the disclosed financials, we have updated our price estimate to $341 . Our current price estimate implies more than 10% premium to the market price. While the revenue growth remained strong, the expenses increased which resulted in the stock plummeting by almost 10%. Amazon’s shares have fallen by roughly 25% since the beginning of the year but much of it can be attributed to broader market correction. The company’s fundamentals remain strong as it continues to increase its presence in the global e-commerce market. Additionally, its web business and Amazon Prime service continue to be key growth drivers and differentiators, and are going to be increasingly valuable going forward. Here is what you should know about Amazon’s first quarter earnings.

See our complete analysis for Amazon

General Merchandise Growth Was Stellar But Media Segment Remained Slow
/>

Amazon saw its revenues jump by 23% in Q1 2014, which was closer to the high end of its guidance. This has been the pattern for the last few quarters as the company continues to leverage its size, strong vendor network and technological advantage to expand its presence both in the U.S. and international markets. However, the stock still fell almost 10% following the earnings announcement due to higher spending that could weigh on the retailer’s margins in the near term. Improvement in EBITDA margin in the last two years is something that has fueled positive investor sentiment. Amazon’s EBITDA margin is very low, which implies that the stock is extremely sensitive to any change in its value. The stock’s history suggests that the market has placed a high premium on revenue growth while ignoring the company’s profitability. However, that may not continue to be the case as the business matures. Sooner or later, Amazon will need make strategic decisions to improve its profit margin.


/>

We have previously stated that while Amazon’s domestic business is doing well, the company could do better internationally. As it turned out, the international operations picked up this quarter except for the media segment. While the electronics and general merchandise business is growing at a rate of more than 25%, media segment’s growth hasn’t been exactly stellar. Amazon’s media sales in the U.S. increased by a little more than 12%, whereas the figure for international markets stood below 5%. Even though there is a clear shift to digital products in media segment, the lack of local content continues to be the major hindrance. This issue, while fixable, will take sometime to resolve.

Amazon Prime Service And Cloud Business Will Be More Valuable Going Forward
/>

Amazon mentioned that its prime service continued to add new subscribers for trials despite the recently announced price hike which indicates low price elasticity and therefore, more room for price increases. This holds true for Amazon’s core business, too, as many of the studies conducted by the company show that the price elasticity for its products is low. Despite this, it hasn’t resorted to price increases across its general merchandise and media segments. Amazon Prime service is getting a boost from improved streaming content and the benefits of free shipping attract frequent buyers. The service has complimented the retailer’s core business well and will continue to be one of the key differentiators going forward. The value of this differentiation will only widen as Amazon expands globally.

Amazon’s ‘Other’ segment revenues jumped by 58%. Most of the sales from this reported segment can be attributed to Amazon’s web services. The company’s web services enable cloud storage and computing for corporates and small businesses, thus creating an infrastructure to drive more data on the Internet. This fits into Amazon’s intent of enabling the online shift of businesses and consumers, which will help it further its interests. Additionally, the web services business is hugely profitable and the company can invest the profit from this segment to expand its core retailing business. To Amazon’s delight, it is ahead of other competitors in the race to become one of the biggest cloud services providers in the world. The company has frequently reduced its prices in order to bag deals. As a large chunk of corporates are expected to change their technology vendors over the course of next few years, Amazon has a distinct competitive advantage to leverage this development. Some analysts have estimated Amazon Web Services to be $5 billion a year business with gross margins north of 90% .
/>
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
/>

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin .

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken in ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rej ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin Hussein ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states last mon ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in c ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involv ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme 20 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway ( ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Bangladeshi plane catches fire at Nepal airport, passengers safe
Kathmandu, July 28 (IANS) A Bangladeshi aircraft caught fire while landing at Kathmandu's Tribhuvan International Airport (TIA) Monday afternoon, officials said.
 
 
Shift work can worsen asthma, pneumonia
London, July 28 (IANS) A research has found that drugs widely used to treat lung diseases like asthma or pneumonia work better with the body clock.
 
 
Decoded: What triggers sexual arousal in you
New York, July 28 (IANS) Know why just looking at an attractive face stimulates sexual arousal? Well, it takes two to tango!
 
 
Turn your selfie into emoji with this app
New York, July 28 (IANS) Tired of seeing the same yellow-faced smileys? In an age of selfies, how can emojis be far behind?
 
 
 

Latest from the Network

Scoreboard: India vs England, day 2, third Test
Southampton, July 29 (IANS) The following is the scoreboard after the second day's play of the third cricket Test between India and England at the Rose Bowl here Monday: England (first innings, overnight 247/2)...
Read more on Sport Balla
 
UN call neglects Israel's security needs: Netanyahu
Jerusalem, July 29 (IANS) Israeli Prime Minister Benjamin Netanyahu Monday criticised the UN Security Council's call for ceasefire in the Gaza Strip, saying it strengthens Hamas and neglects Israel's security needs....
Read more on Politics Balla
 
Three dead, 16 injured in Nigerian suicide attacks
Abuja, July 29 (IANS) At least three people were killed and 16 others injured in two suicide bombings Monday in northern Nigeria's Kano state, officials said. In the first incident, a female suicide bomber attacked a...
Read more on Politics Balla
 
31 killed in Iraq violence
Baghdad, July 28 (IANS) At least 31 people were killed and 20 others wounded in the latest violent attacks and conflicts in Iraq, police source said Monday. Police patrols Monday found 14 unidentified bodies - 11 men...
Read more on Politics Balla
 
Narang clinches men's 50m rifle prone silver
Glasgow, July 28 (IANS) Indian shooters continued to bring home more medals as Gagan Narang won the country's third medal Monday clinching the men's 50-metre rifle prone silver in the finals at the Commonwealth Games...
Read more on Sport Balla
 
Renew humanitarian truce in Gaza: UN chief
United Nations, July 28 (IANS) UN Secretary General Ban Ki-moon Monday urged Israel and te Islamist Hamas movement to renew a humanitarian ceasefire in Gaza and called on those responsible to "step back from provoking...
Read more on Politics Balla
 
Indian paddlers lose men's team bronze playoff
Glasgow, July 28 (IANS) India's men paddlers suffered a disappointing finish in the team bronze medal playoff, losing to Nigeria 1-3 at the Commonwealth Games here Monday. India, who had won the bronze in the same...
Read more on Sport Balla
 
Ousted Thai PM faces power-abuse allegation
Bangkok, July 28 (IANS) Thailand's Election Commission (EC) is accusing former prime minister Yingluck Shinawatra of abusing power by using public funds to campaign for elections, local media reported Monday. EC...
Read more on Politics Balla
 
CWG: Ghosal, Anaka lose in squash
Glasgow, July 28 (IANS) Indian squash players Saurav Ghosal and Anaka Alankamony bit the dust Monday bringing to an end their individual campaigns in squash singles at the Commonwealth Games here. While Ghosal lost...
Read more on Sport Balla
 
England 452/5 at tea
Southampton, July 28 (IANS) England were batting at 452/5 at tea on Day 2 of the third cricket Test against India at the Rose Bowl here Monday. Ian Bell and wicketkeeper-batsman Jos Buttler were batting on 133 and 13...
Read more on Sport Balla