One of my favorite things in this world is a good sale. Whether it’s shoes, clothes, or stocks, I hate paying more than I have to. Luckily, I’m starting to think Amazon (AMZN) may have presented a post earnings sale opportunity.
As I predicted, Amazon stock did not respond well to its earnings announcement last night. The stock has been trading about 10% below where it closed yesterday. What I didn’t expect though is that Amazon actually beat analyst expectations last night. Revenues increased 23% from the first quarter last year to $19.74B (analyst estimates were $19.4B). Earnings per share rose 28% from last year to 23 cents a share, in line with analyst estimates. And net income rose to $108B from $82B last year.
All in all, Amazon had a great earnings report. The revenue growth alone is very impressive, particularly for a company of that maturity. And Amazon is going to continue to focus on revenue growth with the numerous new products it just announced, including Prime Pantry (grocery delivery service for Prime members), Amazon Fire (a TV streaming device), and a rumors of a phone debut.
With all this there’s little reason I can point to that the stock is down so much. Granted, I was bearish going into earnings, but these reports have me changing my opinion. The one negative piece of news was that operating income decreased 19% over last year, partially fueled by a 31% increase in shipping costs. However, the increase in costs is understandable given the need to support the big increase in revenues (particularly the free shipping they provide for these increased sales), and I think the effect of shipping costs will stabilize as the Prime membership cost increase goes into effect.
Given that I can’t point to a good reason for the stock to drop today, I’m thinking it may be time to take advantage of the “sale” and get into Amazon. Revenue growth has made me optimistic, particularly when paired with the new products they have coming out. If the stock drops below $300 next week I’ll be picking up some shares.