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There's always such a big bet against Amazon [AMZN
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] hanging over the company but tonight they have problems. Still, where the shorts might stage a comeback, however, is with Amazon's first quarter guidance.
Amazon knocked consensus for a loop, reporting 52 cents a share against the 39 cents consensus. That's a big deal since many analysts had anticipated an EPS miss and margin squeeze because of free shipping and deep price discounting during the holiday shopping period. Neither worry came to pass with the company also reporting a 20.1 percent gross margin, or right in line with expectations. That news came on $6.7 billion in revenue, or almost $300 million ahead of the $6.437 billion expected.
Looking at some of the key metrics: North American revenue jumped 18 percent, way ahead of the 13 percent expected. Mark Mahaney at Citigroup said anything above 15 percent would be considered positive. Likewise for International revenue growth, which increased 19 percent, and that shows an acceleration from the company's report during the fourth quarter last year.
Guidance is where the Amazon story gets a little squishy.
The company is now anticipating revenue of $4.525 billion to $4.925 billion, which raises the mid-point of the $4.598 that Wall Street was looking for. But operating income in the first quarter of $125 million to $210 million, well below the anticipated $261 million expected. Maybe that means an infrastructure build? Or a sacrifice on margins? Offering more promotional activity? More likely a combination of both. Yet, if it's something more insidious, like a big drop-off in business, that's where the shorts might see a bright new day anew. At this point, though it doesn't seem like that's the case, and that's why Amazon shares were off to the races the moment these numbers came out.
"They didn't sacrifice bottom-line for top line so that's a positive," says Gene Munster at Piper Jaffray. "To do that top line growth and maintain that margin means they weren't massively discounting the way the bricks and mortars guys were."
When you analyze this report against what rival eBay [EBAY
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] reported last week, it's night and day, and just goes to show the widening gap between these two rivals. Amazon/eBay is shaping up to be an equivalent of Google/Yahoo, and while eBay continues to try to adapt its model to better compete with Amazon, Amazon just keeps accelerating its momentum.
"What's fundamentally wrong with eBay and its auction-based system is what's right with Amazon," says Munster. "Fixed price and ease-of-search. It's a shift in consumer online buying behaviors. People want ease and convenience. eBay is clumsy."
We learned from eBay last week that better than half its business comes from the Buy It Now, or fixed-price feature. Yet the company is a marketplace enabler, rather than a goods supplier, composed of millions of different companies selling their goods. Amazon's buy-and-ship model seems to be more of what consumers want right now, and while the eBay transformation may take several quarters to gain traction, Amazon continues to surge.
A smattering of reaction: "It's very good, far better than everyone was expecting in revenue terms, margin terms in EPS," says Jeffrey Lindsay at Bernstein.
"Everything looked very positive," said Hamed Khorsand, BWS Financial. "They definitely grew faster than what industry reports were suggesting that online sales grew by."
Todd Leone at Cowen & Co. says "Whenever a company like Amazon pulls earnings, it's great for the market. The consumer is still spending a little bit or they have their act together, and they're managing their company really well."
And then there's eBay....
Questions? Comments?
Data is a real-time snapshot *Data is delayed at least 15 minutes