There was much anticipation for Amazon’s AMZN Q4 results last Thursday as the e-commerce giant had previously disclosed it saw a record holiday shopping season.
While Amazon surpassed Q4 top and bottom line expectations, the company’s guidance was underwhelming to many on Wall Street. That said, let’s see if it’s time to buy, sell, or hold Amazon stock.
Amazon’s Q4 Results
Amazon’s Q4 sales rose 10% year over year to $187.79 billion and topped estimates of $187.27 billion. Staying ahead of Alphabet GOOGL and Microsoft MSFT as the largest cloud provider, Amazon Web Services (AWS) attributed to 16% of Amazon’s top line at $28.78 billion. AWS segment sales increased from $24.2 billion in the prior period despite slightly missing estimates of $28.83 billion.
Net income increased from $10.6 billion in the comparative quarter to $20 billion or $1.86 per share, an 84% spike from Q4 EPS of $1.01 a year ago. Crushing Q4 EPS expectations of $1.52, Amazon has now surpassed earnings expectations for nine consecutive quarters and has topped sales estimates in three of its last four quarterly reports.
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Amazon’s Full-Year Results
Rounding out fiscal 2024, Amazon’s total sales were up 11% to $637.96 billion compared to $574.78 billion in 2023. More impressive, annual earnings soared 95% to $5.53 per share from EPS of $2.84 in 2023.
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Amazon’s Underwhelming Guidance
Offering revenue guidance for the first quarter, Amazon expects Q1 sales at $151-$155.5 billion which came in below many analyst expectations of $158 billion. Notably, the current Zacks Consensus has been revised down to $154.86 billion or 8% growth (Current Qtr below).
The lower sales forecast was attributed to unfavorable foreign exchange rates with Amazon expecting a $2.1 billion impact in correlation with a stronger U.S. dollar.
However, Wall Street also soured at Amazon’s increased spending which will be primarily aimed at building out AI data centers. Although Amazon’s diverse business operations are in prime position to be lucratively enhanced by AI, the company expects its capital expenditures to balloon to $100 billion this year from $83 billion in 2024.
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Monitoring Amazon’s Balance Sheet
What may ease investors' concerns in regard to Amazon’s increased spending is a strong balance sheet. To that point, Amazon currently has $101.2 billion in cash & equivalents. It’s also noteworthy that Amazon’s total assets of $624.89 billion is still nicely above its total liabilities of $338.92 billion.
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Bottom Line
For now, Amazon stock lands a Zacks Rank #3 (Hold). Remaining a cash cow, Amazon’s plan to build out its AI infrastructure could be warranted for future growth but better buying opportunities may be ahead.
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