Amazon Crushes Estimates, Shares Soar

Amazon.com stunned investors on Thursday with first quarter 2012 revenues that beat consensus fourfold, and that vindicated CEO Jeff Bezos for his outsized investments. Analysts fretted about the substantial increases in spending on data center infrastructure and digital content on the back of what looked like slowing demand for e-products, adding pressure to profits. Nevertheless in the quarter, higher earnings and lower costs lifted profits at the giant online retailer.

Amazon shares jumped 15% to $225 in afterhours trading, rising to a valuation of 70 times forward revenues.  By comparison, the price-to-revenues ratio for the S&P 500 is 12 times and Apple trades at 13 times forward revenues.

Amazon's net sales were $13.2 billion in the quarter compared with $10 billion a year ago, a 34% rise driven largely by sales of the new Kindle Fire. Consensus expectations for earnings were $12.9 billion. Operating income was $192 million compared with $322 million a year ago. EPS came in at a surprising $0.28, four times better than the consensus EPS estimates of $.07. Maria Bartiromo did a double take as she read the results on CNBC afterwards the close.

Amazon spent in three main areas: customer service centers for online retail; digital content, or e-books, games and videos; and network infrastructure for its cloud computing service. It introduced the Kindle Fire tablet to compete with the new iPad from Apple. The Kindle Fire may sell at slight loss or breakeven; its financials were not disclosed. Bears who contended that Amazon's print-to-digital transition was slowing down evidently missed the mark. Sales of e-books, videos and games showed momentum, suggesting Amazon’s shift toward digital was on the upswing and gaining traction.

The number two content provider behind Apple

Amazon is the number two content provider behind Apple, which dwarfs it with three times the revenue. Both companies sell content and devices in online stores, nevertheless Apple has a far wider ecosystem, better brand and deeper product line.  Amazon launched an exclusive line of content to differentiate its offerings and gain a competitive edge.

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Bunch of morons

These analysts are in effect becoming a bunch of morons. If they keep getting crushed like they did by the likes of Amazon and Apple, you have to ask if they truly know what they’re doing or are they just pulling numbers out of their @$& to justify a salary. Hopefully, investors are not putting too much weight on their opinions…I know I’m not.

Amazon’s share price increase afterwards earnings makes Apple’s share price gains look thoroughly pathetic. I wonder what the Apple bulls have to say about that. Everyone talks about the almighty Apple machine and how much of a money-maker it is for shareholders. Apple’s share price after revenues shows a more compressed P/E than ever previously whereas Amazon’s P/E has again expanded. The market took down Apple 15% right previously earnings and gave back about 8% of share value back to shareholders. Amazon was taken down a few percent but gave 15% directly to shareholders. No indications of profit-taking or any correction for Amazon.

So much for Apple being Wall Street’s favorite child. Evidently, Amazon doesn’t need huge margins for shareholders to be rewarded. Apple needs to find a way to run the company in such a way that Wall Street will give it a break like Amazon is getting with it’s 140+ P/E. It just seems to be constantly increasing as the weeks go by. Apple shareholders got totally pwn’d by Amazon.

” Apple needs to find a way to run the company in such a way that Wall Street will give it a break like Amazon is getting”

I’ve wondered if Apple bought Amazon what would the analysts do? Bring Applazon up, or bring it down? Does it depend upon who conducts the conference call and does it depend upon preferential meetings with specific analysts?

When Amazon grows up, it’d like its financials to look like Apple’s, just the same, even if we were to confine our view optimistically just to Amazon’s top line; during its rate of growth is healthy, it’s nevertheless not near as strong as Apple’s, a company of brobdingnagian size. If it’s going to ever catch up to Apple’s bottom line size, it first needs to grow its top line far faster than it currently is.

Investment manager in public

I'm an investment manager in public and private equity. My business advises fund managers, tech start ups and non-profits. I was a top-ranked sell-side analyst on Wall Street for a decade. I have a masters and bachelors from the University of Maryland and specialized in global satellite communications in graduate school.