What Will Amazon Do Post-Earnings?

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With shares of Amazon (NASDAQ:AMZN) trading around $364, is AMZN an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Amazon serves its customers through its retail websites and focus on selection, price, and convenience. The company also manufactures and sells Kindle devices. Amazon offers programs that enable sellers to sell their products on the company’s websites, including the sellers’ own branded websites, and fulfill orders through them. Amazon also provides platforms that allow authors, musicians, filmmakers, app developers, and others to publish and sell content. Online commerce has been on the rise because of the convenience, efficiency, and relatively low prices offered.

Amazon shares fell up to 9.4 percent Thursday as continued concerns about the company’s spending habits outweighed the higher revenue possible from raising the price of its popular Prime membership. Investors’ faith in Amazon has relied in part on consistent sale gains fueling the company’s lavish spending on warehouse construction and secretive internal projects that it has indicated will yield bigger returns in the future. In the fourth-quarter, Amazon’s revenue rose 20 percent — but so did the company’s operating expenses.

In the end, the company’s results failed to match Wall Street projections. Along with its results, however, Amazon also said it could lift the $79 annual fee for its popular Prime two-day shipping service by $20 to $40. Doing so could add between $500 million and $1 billion in revenue, with no added expense, analysts said. ”While the increase in Prime pricing appears to be a positive for margin in the near term,” J.P. Morgan analyst Doug Anmuth said, “we believe Amazon is likely to re-invest some of the additional shipping revenue to increase capacity.”

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