Examining Amazon’s 2018 Outlook After Solid Q1

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Amazon

Amazon (NASDAQ:AMZN) announced its its first quarter results on April 26, reporting a massive 43% y-o-y increase in net revenues to $51 billion. The e-commerce giant has reported a strong period of growth in the last couple of years, driven by Amazon Web Services (AWS) as well as its core commerce business. Amazon has managed to sustain high revenue growth despite the large base factor – a trend which is likely to continue over the next few years as well. Operating expenses were up 41% to $49 billion, which led its operating income to increase by over 90% to $1.9 billion. Net income and earnings per share were up 120-125% to $1.6 billion and $3.27, respectively.

Strong revenue growth and slight improvement in profit margins is expected to continue through the year. We forecast net revenue to increase 36% to $240 billion for the year, with Amazon North America revenues expected to increase at the same rate to $145 billion. We expect Amazon International revenues to be up 30% to $70 billion, with the segment’s profit margins likely to continuing to be low as the company continues to invest heavily in expansion plans in international markets. Meanwhile, AWS revenues are are expected to be around 44% higher on a y-o-y basis to $25 billion. We forecast its operating margin to expand by around 1 percentage point to 11% for the year, due to which EPS could lie in the $8.30-$8.50 range. The consensus estimates for Amazon’s earnings per share for 2018 range from $6 to $13 per share, compared to around $6.15 through 2017. We have created an interactive dashboard where you can change expected segment revenue and income margin figures to gauge how it will impact the company’s expected results for the full year.

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We have a revised $1,266 price estimate for Amazon, which is around 20% lower than the current market price. Amazon’s stock price has surged from around $1,100 in November last year to $1,600 in March this year. It has since fluctuated between $1,390 and $1,580.

See our complete analysis for Amazon

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