Amazon 1Q - more impressive growth

Amazing Amazon just continues to thrive. They reported first quarter 2017 results last night which the market took kindly to. The stock is up 4% after the close, touching on $954 a share! Before we go through the many highlights, let's look at the numbers.

Revenues came in at $35.7bn which is up 22.6% yoy beating consensus of $35.3bn. Operating income breached $1bn while operating cash flow grew 53% to $17.6bn. Earnings per share smashed expectations, $1.48 vs consensus of $1.08. As you can see, price to earnings is off the charts. But Amazon is still in it's infancy. Quite incredible for a company with a market cap of $440bn.

The company reports in 3 segments. North America, International and AWS (Amazon Web Services). See the image below for the break down.



Note the huge growth in sales in it's most mature market, North America. The International segment is still fresh and new. They have invested heavily in India, here is what CEO Jeff Bezos said about the region.

"Our India team is moving fast and delivering for customers and sellers. The team has increased Prime selection by 75% since launching the program nine months ago, increased fulfillment capacity for sellers by 26% already this year, announced 18 Indian Original TV series, and just last week introduced a Fire TV Stick optimized for Indian customers with integrated voice search in English and Hindi."

When I was there a few months ago I noticed a big Amazon presence. To avoid the traffic in that place, buying online is a no brainer!

AWS is also thriving and is their biggest profit driver. Web services is a competitive industry with the likes of Microsoft and Google also getting in on the act. But Amazon have a fantastic reputation and will continue to leverage off this cash cow to grow other parts of their business.

When Amazon reports results they list a bunch of highlights for the quarter. Considering that this is for a period of 3 months, the highlights reel is always impressively long. A few that stood out for me in this report are the following:

Amazon signed a deal with the NFL as it's exclusive partner to deliver live streaming of Thursday Night Football to Amazon Prime subscribers. The race to stream live sports is on and with Amazon's resources and an estimated 80 million Prime subscribers, I think they may win it.

Launching Prime in Mexico with over 20 million products available.

Amazon Fresh (groceries) is now available in Japan, the UK and 21 Cities in the US.

Original content breaking viewership records in Japan and Germany.

I really feel that Amazon now have the size and scale for world domination. The Prime membership is genius. You have 80 million users who have logged in their credit card details. All it takes is one click to make a purchase. You can attract more subscribers with incredible content such as movies, series, gaming and live sports. They are in all the right pockets of growth. Once you are a member, the services available are amazing.

Now all they have to do is spread their wings and grow globally. India makes sense with it's untapped 1.2 billion people (of course China has Alibaba and Tencent providing similar services). At least content does not require massive logistic and infrastructure spend which allows them to easily operate in many new regions (like South Africa). But I am sure that they will target online retail wherever they go in time. The concept of buying online is relatively new but the shift is real.

There are many competitors out there with regards to online retail, content, web services and hardware. Many of them are Vestact recommended stocks. In my opinion there is enough room and enough growth off a very low base for all these businesses to thrive. With Jeff Bezos at the helm, Amazon will dominate for many years to come. Investors should hop on for the ride.