Amazon.com on Sale after Shortfall
buz Investors Retail Disrupter Amazon.com, Inc. (NASDAQ:AMZN) got slammed after reporting a shortfall in its fourth-quarter sales and offering a below-consensus first-quarter sales guidance.
While the sales concerns are justified, especially given that AMZN stock has risen 58% over the past 52 weeks, I view major share price weakness as an opportunity.
AMZN stock trades at 55 times its 2017 earnings per share (EPS) and 22 times its book value, both indicating that major growth is discounted into the share price, so it should not be a surprise that the stock lost some ground. In reality, many traders probably hoped for a bigger decline than the 3.5% move.
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Wal-Mart’s move could force Amazon.com to tinker with its pricing strategy, but the reality is that Amazon has a big advantage in that its shoppers have access to hundreds of thousands of retailers from around the world.
In 2016, Amazon.com reported that it had delivered over two billion units for sellers while the number of active sellers surged in excess of 70%. In all, sales were shipped to shoppers in 185 countries from sellers in over 130 countries. (Source: “Amazon.com Announces Fourth Quarter Sales up 22% to $43.7 Billion,” Amazon.com, Inc., February 2, 2017. )
In addition, AMZN stock will benefit from the growing adoption of the company’s “Amazon Web Services” (AWS) cloud business that witnessed year-over-year growth of 47%, to $3.5 billion in 2016.
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