Amazon full year and 4Q results

Amazon released their 4Q and full year results on Thursday last week, Amazon.com Announces Fourth Quarter Sales up 15% to $29.33 Billion. The company's stock was up 14% after the announcement because they made a small profit. Their EPS for the quarter was 45c compared to the 95c loss in the previous quarter.

If you follow Amazon at all you will know that they are all sales and no profit; too much (if that is possible) investment in growth and very thin margins. Here are the numbers. Revenue for the 4th quarter was $29.33 billion, up 15% from the comparable quarter, full year revenue is at $88.99 billion up 20% from a year earlier. To put that into perspective, Google had revenue of $66 billion for the full year. So the revenue number is great but they still made a loss for the full year. The Net loss of the full year was $241 million compared to a profit of 274 million a year earlier.

Growth for the current quarter is expected to be between 6 and 16% but they are likely to make a loss due to stock based compensation and amortisation of a few assets. Basically same old storey more top line growth and no bottom line growth. If you believe that Amazon (Jeff Bezos) is building a company that will be the king of retail in the next decade then it is not a problem. If they don't get big enough, quick enough and allow other online retailers to get a solid foothold in the e-commerce market, then as an investor you have a problem. To ensure that they put daylight between them and competitors they spent $5 billion dollars on growing and investing on their systems and website. Doing a very basic calc, your P/E ratio sits in the mid 30s if you add back their invested billions.

The "moat" that Amazon are building around their business is through their Prime subscription. Being a Prime member gives you free shipping, access to their online media and the ability to use their cloud storage for free. Being a Prime member costs $99 a year which is not nothing but the benefits definitely outweigh the costs. Their prime membership grew by 53% over the last year to an unknown number. Analysts estimate the number of Prime members sit at around 40 million.

On average a Prime member spends around 2 and 3 times more on Amazon than an average user! So in other words you have 40 million very loyal customers and that number is growing at a rapid rate.

Other big innovations include being able to get delivery in under an hour in some parts of New York. With a delivery time like that brick and mortar shopping does not sound as appealing. Sales for North America were up 22% compared to International sales which were up only 3%. There is still huge potential for the international devotion of their business and as internet speeds improve and courier companies become more reliable, we will see sales grow there as well.

The goal for Amazon is to be the "everything shop" and that is where Bezos is driving them. I think that they will be the size of Walmart in the next decade which will be great for their investors. Between now and then it will be a very bumpy ride! (Assuming that day arrives)