Amazon.com (AMZN) Analysis
In a previous segment, we analyzed Walmart and Amazon.com and the profit margins and business models.
We found that Walmart is a superior business with better margins compared to Amazon.com. Let us look at Amazon's current quarter to see how it compares to its previous quarters and see if Amazon.com is a buy.
In the current quarter, amazon.com's operating expenses increased by 1% from the same quarter last year. The income from operations declines by 1% from 6% to 5%.
On a positive note, the stock dilution was limited in 2005 compared to 2004. The number of stocks outstanding increased by one million to 426 million from 425 million - an increase of .25%. This would make even Warren Buffett proud! The year over year operating earnings declined in north america. The operating earnings increased internationally.
There will be continued pressure on Amazon operating income because of continued pressure from search engines. The online market is changing rapidly and search is becoming the best way to look for things on the web. This trend and also opening up book contents by Google is going to put additional pressure on Amazon.com. In my opinion, the current P/E of 36 is still a high price to pay for Amazon. A fairer price would be a lower P/E than Walmart. Amazon is down after hours and is likely open lower tomorrow. The reason for the lower stock price is because Amazon missed analyst's estimates for revenues if not earnings.