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Earnings Recap: Amazon

Posted on: July 23, 2008 - Email Article - Printable Version

Santosh Sankar

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Internet giant Amazon [AMZN: 54.06, 0.00 (0.00%)] posted quarterly earnings after hours today with Amazon.com Logo a net income of $158 million on revenues of $4.06 billion. The company reported a 41% increase in sales that helped quarterly results. The company topped estimates by $0.11 with an EPS of $.37 while the street estimated earnings of $.26 per share. Investors reacted well to the results and the stock is down almost 2% in after hours trading.

Poor market conditions have not discouraged consumers from spending, this is evident with AMZN’s strong sales growth. Historically, the slowest quarter saw AMZN expand margins to over 5% with a surge in CD/DVD sales. Amazon has increased guidance for Q3 with sales growth of over 29% as well as as a full year sales increase of over 30% . This seems to keep investors on edge and watching the consumer reliant giant as we flirt with the possibility of recession.

Opinions?
In my perspective, it is not the time to buy into AMZN. Inflation is growing and the latest reports have the domestic economy slowing down. The IT sector offers exposure to great companies that will not be affected by any deterioration in already murky waters. The company trades above many of its peers, signaling better valued investments elsewhere in IT. Perhaps when the economy settles down we can return to AMZN and ride it up as consumers ramp up spending.

-Santosh Sankar

Disclaimer: Author has no positions in AMZN.

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