Amazon’s Profits Are Zooming, Stock About to Break Out

Stock (Symbol)

Amazon.com (AMZN)

Stock Price

$716

Sector
Technology
Data is as of
June 30, 2016
Expected to Report
Jul 21 – Jul 25
Company Description
AMZN_kindle_booksAmazon.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
David SharekAmazon.com (AMZN) gets a lot of slack from investors for “building to grow” and not allowing what are unknown amounts of profits to flow to the bottom line. Thus, many money managers who try to buy growth at a reasonable price haven’t been in the stock as its grown 34% a year on average the last ten years. But now there’s a new story that no one’s talking about: Amazon’s profits are zooming higher. In the past, AMZN used to lose money some qtrs, make money in others. From 2012 to 2014 AMZN’s annual profits were $-0.09, $0.59, $-0.52. Now suddenly (and secretly) AMZN has made around $1.00 the last 2 qtrs — and estimates show that should continue the next 2 qtrs ==> then jump to more than $2 three and four qtrs out. THIS could be the point where AMZN starts raking in the profits. Analysts have estimates of: 2016 $5.39, 2017 $9.91, 2018 $16.71. That would be huge growth! Another under-the-radar fact is AMZN stock is close to a 52-week high (which is the All Time High) of $731. This is big news because the stock market might break out too — and AMZN could be a leader in the next Bull Run. Growth stocks have been dead money the last year, they are dying to break free and run. THIS could be the time, and AMZN can lead the charge.
One Year Chart
AMZN_2016_Q2The “bookseller” put up $1.07 in profits last qtr vs. $-0.12 a year ago, whipping analyst estimates by 50 cents. the company missed by 65 cents the qtr earlier, beat by $0.32 and $0.37 the prior 2 qtrs). That’s 992% profit growth on a 28% gain in sales. Also, AMZN’s P/E has often been astronomical, but when I figure it on future years it’s 72x 2017 profits and 43x 2018 profits. At least there’s a reasonable P/E on the horizon. Spectacular Est. LTG of 49%. Triple-digit growth now and in the future — a key characteristic of Superstar stocks.
Fair Value
AMZN_2016_Q2_PHYou can really see the profit acceleration expectation in the Profit History Table. 2018 estimate is $16.71 (not shown). It’s hard to put a valuation, or a Fair Value P/E on AMZN because it spends to grow.
Bottom Line
AMZN_2016_Q2_10yrAmazon could be on the edge of amazing profitability, and that could be the catalyst to take the stock higher. This is a formidable franchise with profit growth expecting to be 479%, 465%, 130% and 102% the next 4 qtrs. The risk is the P/E is so enormous because the company continues to reinvest, thus value investors can’t gauge what the stock is really worth. I feel the market is ready to go higher and Amazon is within striking distance of breaking out and leading the charge. AMZN ranks 3rd in the Growth Portfolio and 2nd in the Aggressive Growth Portfolio Power Rankings
Power Rankings
Growth Stock Portfolio

3 of 39

Aggressive Growth Portfolio

2 of 16

Conservative Stock Portfolio

N/A