Amazon Stock Analysis: The Newest Frontier

Yosef CohenThis article was written by Yosef Cohen, a Junior Financial Analyst at I Know First and student at Baruch/Macaulay Honors College.

Amazon Stock Analysis


  • AMZN company summary
  • Q3 Earnings Analysis
  • Amazon Web Services
  • Amazon Prime’s Performance
  • I Know First’s Forecast on AMZN

Amazon Stock Analysis

AMZN Company Summary

AMZN has reached all-time highs in 2016. Amazon has been expanding its marketshare for years. Inc. vendors merchandise both by itself and through third party sellers. Amazon is the world’s second to largest online retailer. Amazon also has a newly profitable branch called Amazon Web Services. AMZN’s stock price is currently at $761.00.

Q3 Earnings Analysis

Amazon Stock AnalysisAmazon reported strong earnings year over year. Amazon’s revenue last quarter was $32.71 billion, increasing 29% from last year. Net income came in at $252 million last quarter or 0.52 cents per share. These numbers upset expectations which had Amazon at 0.78 cents per share with a revenue of $32.69 billion. Amazon’s stock decreased 5% after news of the upset

Amazon managed to surpass the revenue expectations, yet reported lower earnings per share. Several reasons explain why this happened. One is that this likely due to high expectations from earlier quarters this year. Another is that Amazon’s operating expenses have been increasing astronomically yearly. Amazon’s gross margin also decreased last quarter. This shows that the cost of goods sold has been squeezing profits for Amazon. Amazon’s efficiency has been dwindling, which is the main cause of lower than expected earnings per share.

Amazon’s liquid assets have been decreasing due to investments in more fulfillment centers (18 last quarter). This should make Amazon a riskier investment, but since it is being invested in the company’s future, it is more of a positive attribute for Amazon. Amazon is known for reinvesting profits into their company, which is what created such a large surprise when Amazon reported large profits for the last few quarters, which the last quarter didn’t match. Amazon is trying to extend its reach and gain more customers in different regions.

Amazon Web Services
Amazon’s Web Services have shown the most surprising results this quarter. Revenue is up from $2.0 billion last year to $3.2 billion this year. That is a 60% increase year over year. Amazon’s margins are also significantly larger on AWS than on its retailing. Amazon would have shows losses without AWS last quarter. AWS became a large part of Amazon’s company and provides large opportunities for Amazon.

New functions in AWS such as Athena, QuickSight, and Redshift constantly expand Amazon’s opportunities. Athena provides an interactive query service allowing easier data analysis. QuickSight is used in business analytics to incorporate visualizations for data. Redshift improves data compression, connection management, and data loading. These new services constantly being released by AWS provides a large market to sell high quality services to. This sector of Amazon is poised to continue seeing the most growth within Amazon for several years.

Amazon Prime’s Performance

Amazon Prime has always been a large focus in Amazon’s retail. Prime is a service that offers faster, free shipping and exclusive deals to members. Amazon raised its membership fee from $79 to $99 earlier this year, yet Prime members are now up to 65 million. An Amazon Prime member spends an average of $1,200 opposed to $600 for a regular customer. Amazon Prime has been a lucrative venture and will likely continue to see increased usage despite the $20 increase.

I Know First Forecast

Below you can find the forecast for AMZN. AMZN is projected to perform excellently in the next month, three months and year.

Amazon Stock Analysis

I Know First predicted AMZN’s stock movements correctly before. This article predicted Amazon’s growth in 2016, and the figure below shows Amazon’s growth since then.

Amazon Stock Analysis

This forecast was sent to I Know First subscribers on December 9th, 2015. To subscribe today click here.