With shares of Amazon Inc. (NASDAQ:AMZN) trading at around $273.65, 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:
C = Catalyst for the Stock’s Movement
Amazon is up over 5 percent today after releasing earnings last night. Q4 EPS came in at $0.21 on revenue of $21.27 billion. Operating income blew away expectations and was up 56 percent year-over-year. Operating cash flow increased 7 percent to $4.18 billion. Free cash flow decreased a whopping 81 percent to $395 million, but Amazon was wise to have set the stage for this earlier so it wasn’t a surprise. The primary reason for the drop in free cash flow was a $1.40 billion purchase of corporate office space and property in Seattle, Washington. Considering Amazon’s consistent growth, they needed the space, but the cost seems a bit high if the goal is to remain budget-conscious.
The hottest item on Amazon.com has been the Kindle Fire HD. Founder and CEO Jeff Bezos stated, “eBooks is a multi-billion dollar category for us and growing fast – up approximately 70 percent last year.” Physical books showed the slowest growth for December in 17 years, but it was still an increase of 5 percent. Amazon also announced its AutoRip feature, which will allow free MP3 versions of CDs purchased from Amazon.com.
Amazon’s digital media library is growing to an unfathomable size, and strategic partnerships are being made on a regular basis.
From here, it looks like Amazon is a no-brainer for OUTPERFORM, but let’s take a look at some important numbers prior to forming an opinion.