Amazon stock surged on Friday after the tech giant reported quarterly results that beat expectations for both earnings and revenue.
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In the results published late Thursday night, Amazon.Com (AMZN) said it earned $170 per share on sales of $1 billion. For the quarter ending December. Analysts had forecast the company would report earnings of 80 cents per share on sales of $165.9 billion in the December quarter, according to FactSet.
Sales for the quarter rose 14% year over year, while earnings rose 3 cents per share from the year-ago quarter.
Meanwhile, Amazon Web Services sales rose 13% year over year to $24.2 billion, in line with expectations for the closely watched cloud business.
Amazon estimates sales of $138 billion to $143.5 billion for the current quarter, According to FactSet, analysts were expecting $142 billion in Amazon sales for the reported March quarter.
Amazon closed 7.9% higher at 171.81 in the stock market today.
Amazon Stock: Retail Margins, AWS in Focus
Coming into the report, analysts were focused on Amazon’s cloud-computing business and the margins of its North America retail segment.
“This is certainly a fine print, with an improved outlook and room for continued upside,” William Blair analyst Dylan Cardon wrote in a client note. “While AWS’s revenue ‘only’ came in line with expectations, it delivered on improved margins and with commentary suggesting that the accelerated pace of growth should continue through 2024.”
The 13% year-over-year sales growth for AWS marked an improvement from the 12% growth rate for the division in the third quarter. Analysts are looking for signs that AWS can pick up sales again after a slowdown in growth last year.
The cloud-computing business continues to be a huge profit driver. AWS provided $7.2 billion of Amazon’s total operating income of $13.2 billion.
But Amazon’s North America retail division posted operating income of $6.5 billion for the quarter, compared with an operating loss of $240 million in the same period a year earlier.
Evercore ISI analyst Mark Mahaney said Amazon had its highest operating income ever in the quarter.
“Three fundamental catalysts are at play,” Mahaney wrote to clients on Thursday. “AWS’s growth is accelerating, the North American retail segment is headed toward record-high operating margins, and the company as a whole is headed toward record-high free cash flow margins.”
Mahaney reiterated a buy rating and raised his price target for Amazon stock from $195 to $220.
Amazon’s Q4 by the numbers
Meanwhile, Amazon’s direct online store sales rose a better-than-expected 9% year over year to $70.5 billion in the quarter.
Advertising has been Amazon’s fastest growing business. Sales increased 27% year over year to $14.7 billion. Amazon launched advertising on its Prime Video service last month.
The company’s second fastest growing revenue source was third-party vendor services. The fees Amazon charges companies selling through its platform rose 20% in the fourth quarter to $43.6 billion.
Physical stores like Whole Foods lagged behind. Revenue from the division rose 4% to $5.2 billion.
“This Q4 was a record-breaking holiday shopping season and a strong finish to 2023 for Amazon,” Chief Executive Andy Jassy said in Amazon’s news release. “While we have made meaningful progress in revenue, operating income and free cash flow, what we are most pleased with is the continued innovation and improvement in customer experience across our businesses.”
Amazon stock: up 14% at the start of the year
Ahead of the report, Amazon stock closed 2.8% higher at 159.67 in Thursday trading. The company also announced a new generative-AI-powered shopping assistant called Rufus. Amazon said Rufus will provide “expert shopping assistants trained on information from Amazon’s product catalog and from across the web.”
With Friday’s gains, Amazon shares have risen about 14% since the beginning of the year. This has helped drive growth of 81% last year.
Meanwhile, IBD Stock Checkup shows Amazon with a Relative Strength Rating of 89 as of Thursday, indicating that it has outperformed 89% of all stocks over the past 12 months.
Amazon has an IBD Composite Rating of 92 (99 is best), reflecting the strength of several technical and fundamental metrics associated with strong stock performance.
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