Amazon.com (AMZN) huge profit - Conf. Call Notes
4-24-07: Investors of Amazon.com (AMZN) are smiling today. The stock is up 11 points, representing about 26% appreciation after handily beating Q1’s expectations. AMZN's profit was almost double compared to prior year (earned $111 million, or 26 cents a share, compared with $51 million, or 12 cents a share). Both the top line and bottom line were impressive. Although the earning is great, does this company really deserve a 26% appreciation? Our view is the stock is over bought at this level. Our prediction is profit taking will occur in the next few days; highly doubtful this will be able to hold at $56 per share. This would not be the day to buy. There will be other opportunities for that. In case you missed the conference call, here are the main points:
- The free cash flow increased to $512 million in Q1.
- Media Revenue increased to $1.99 billion. This is up 26% in comparison to last year.
- The company currently has about 66 million active user accounts at end of Q1.
- The affiliate program played a large role in the overall sales. In Q1, 30% of sales came from this channel, last year it was 29%. Flat growth.
- Cost is expected to decline for the rest of the year. It appears AMZN has found some efficiency. This should help the bottom line.
- Growth in North America continues to grow. Surprisingly, North America growth is outpacing international growth. The company contributed this to the Amazon prime subscription program. However, international growth is not doing bad, just not growing as fast. This would make sense as outside the U.S, people are still skeptical about e-commerce.
- Electronic is the top selling categories in Q1.
- Grocery service also seeing decent traction.
- Web Services business appears to be an exciting new venture, but not expecting to see economic contribution in the short term. However, the market is huge, representing an immense opportunity. The strategy of AMZN is to allow developers to better integrate with AMZN. All we can say is, it's about time.
- The company see improved margin going forward; expecting higher sales for the rest of this year.
