Amazon shrugs off profit worries, eyes Walmart's sales lead
Amazon.com Inc. executives navigated a familiar Wall Street story line in the company’s latest quarterly results, as big spending to fuel the company’s one-day shipping ambitions have once again raised questions about Amazon’s profit potential.
“The quarter was lower than expected,” Morgan Stanley analyst Brian Nowak said in a note to clients.
While bottom line results sparked some worries, the company’s top line performance highlights Amazon’s obsession with sales growth.
Amazon’s quarterly revenue reached US$70 billion for the second time in its history. And the company said it expects to generate at least US$80 billion for the first time in its current holiday quarter. That’s the equivalent of US$36 million in revenue every hour.
“You’re clearly seeing a sales impact happening on the retail side because of one-day shipping. And it will pay off longer term, in terms of market share and revenue growth,” Bloomberg Intelligence analyst Jitendra Waral said in an interview with Bloomberg Television.
In addition, Amazon’s revenue this year is on track to climb to within half of Walmart Inc.’s annual revenue for the first time. For context, twenty years ago, Walmart’s annual revenue was more than 100 times that of Amazon.
Amazon’s stock remains one of the most loved on Wall Street, with more than 95 per cent of the analysts who cover the company recommending investors own it.
“We are buyers of Amazon on a pullback, as investors digest the cost of one-day Prime,” Baird analyst Colin Sebastian said in a note to clients. Sebastian’s price target on the stock was cut to US$2,080, which would still suggest a gain in the shares of about 20 per cent in the next 12 months.At its current growth rate, Amazon remains on track to generate more than US$300 billion in revenue next year. That could make it the second-largest U.S. company by revenue, ahead of Apple Inc., Exxon Mobil Corp. and Berkshire Hathaway Inc. And it would further narrow Walmart’s significant sales lead.