Stock (Symbol)

Amazon.com (AMZN)

Stock Price

$663

Sector

Technology

Data is as of

December 28, 2015

Expected to Report

Jan 27 – Feb 1

Company Description

Amazon.com, Inc. (Amazon.com) is an e-commerce company. The Company’s products are offered through consumer-facing Websites, which include merchandise and content that it purchases for resale from vendors and those offered by third-party sellers. It designs its Websites to enable products to be sold by the Company and by third parties across various product categories. It also manufactures and sells electronic devices, including Kindle e-readers, Fire tablets, Fire TVs, Echo and Fire phones. Amazon.com operates in two segments: North America and International. The North America segment focuses on retail sales earned through North America-focused Websites. The International segment focuses on the Company’s operations done through its international Websites. It serves developers and enterprises through Amazon Web Services (AWS). It serves authors and independent publishers with Kindle Direct Publishing. Source: Thomson Financial

Sharek’s Take

Amazon.com’s (AMZN) profitability is soaring so fast that profits could rocket higher the next three years. For five years the company has been lowering profit estimates as it invested to grow, and is now at a juncture where profits are flowing in. The most AMZN made from 2011 to 2014 was $1.37, and its conceivable it can make that much in each of the next 4 qtrs — its been delivering triple-digit growth the last 2 qtrs and is expected to continue that the next 4 qtrs. What’s boosting profits is Amazon’s web service (AWS) division, which does cloud services, and is very profitable. AMZN is also a category killer; Amazon Prime is putting a hurt on bricks-and-mortar as well as online retailers. Profits are set to grow from an estimated $2 in 2015 to $5 this year, $10 next year, and $15 the year after. Plus the company has whipped estimates 3 of the last 4 qtrs. The stock market is in a correction — it’s deeply oversold — and AMZN is down from around $675 to $600. I feel when the market turns up AMZN could be a leader of the next Bull Run, thus I will add the stock to the Growth Portfolio and Aggressive Growth Portfolio.

One Year Chart

I do wish to point out this chart is as of 12/28 when AMZN was $663. It closed at $593 yesterday. You can see the triple-digit growth along the bottom of the chart. Last qtr profits soared 118% on 23% sales growth. Estimates are for 267%, 833%, 537% and 494% growth the next 4 qtrs. Also, the P/E of 118 is low by Amazon’s standards. Excellent Est LTG of 60% per year.

Fair Value

Although the stock is overvalued in the table to the right, profits (and the stock) are rising so fast I need to take any pullback as an opportunity to buy. 2016’s estimates have jumped from $2.28 to $5.63 during the last year, and 2017’s have increased from $6.14 to $10.23. AMZN used to lower estimates, now it raises them.

Bottom Line

Amazon’s ten-year chart shows a stock that’s extended, and even this correction doesn’t change that. Still, this is one of the leading stocks in the market, and I feel it is a must-own for growth portfolio managers such as myself as profits could soar ten-fold in 3-to-4-years. Not only is the company making lots of profits with web services, it’s also crushing retailers with low prices and Amazon Prime free two-day delivery. I’m looking at this dip as an opportunity to buy. AMZN will rank 8th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings.