Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


Amazon's Q4 strength; Bezos to step down; Fair value lifted

Dan Romanoff  |  04 Feb 2021Text size  Decrease  Increase  |  
Email to Friend

Wide-moat Amazon (AMZN) reported strong fourth-quarter results, including material upside to revenue, an EPS blowout, and upside to its revenue outlook for the first quarter.

Amazon remains well positioned to prosper from the shift toward e-commerce during the covid-19 pandemic (with particular strength in groceries and staples) in the near term, but also the secular shift toward e-commerce in the long term. We are particularly impressed by margin performance, which we think is a preview of Amazon’s earnings power as covid-19 costs roll away and the company grows into its 50 per cent fulfilment capacity expansion from 2020.

Amazon also announced that founder and chief executive Jeff Bezos will transition to the role of executive chairman in the third quarter and will be replaced by Andy Jassy, chief executive of Amazon Web Services (AWS). We note Mr Bezos will remain actively involved with the company, and Mr Jassy has been at the company for 23 years and was a driving force behind the foundation and growth of AWS.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

We are raising our fair value estimate to US$4,000 per share from US$3,630 based on the time value of money and fine tuning our model for results and guidance. 

Fourth-quarter revenue grew 44 per cent (42 per cent in constant currency) year over year to US$125.6 billion, compared with FactSet consensus of US$120.0 billion and guidance of US$112 billion-US$121 billion. Online Stores and Other revenue (which includes Advertising) were well ahead of our expectations, and we remain optimistic about Amazon’s advertising prospects in particular. AWS, Physical Stores, Third Party Seller Services and Subscription Services were fairly close to our estimates. AWS benefited from feature additions and continued traction in enterprise customers and grew 66 per cent year over year.

Operating margin was 5.5 per cent, compared with 4.4 per cent a year ago and our slightly above consensus estimate of 3.8 per cent. This includes US$4 billion of covid-19-related costs, while Amazon also opened additional fulfilment centers during the quarter which limited further margin upside.

is an equity research analyst on the technology, media, and telecommunications team for Morningstar in Chicago.

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend