We compared Amazon.com and Walmart in the link noted. We found that Walmart is a superior business compared to Amazon.com. In this article, we will take a look at Amazon.com fundamentals again after this quarter earnings to see if things have changed.
The operating income margin declined this quarter compared to the same quarter last year. The operating income was 4.21% this quarter compared to 5.68% last year. The stock option expenses probably contributed to the reduction in operating income compared to last year. Net income as percentage of revenue was 2.23%.
The good news for Amazon.com is the increase in sales. The company continues to grow sales at a very fast clip, faster than Walmart. The growth rate for this year is around 20-25%, this should slow down further in the coming year. The book value of the company is about 70 cents a share which is about 2% of the value of the company. This is far lower than the other internet darling, Google which has a book value close to 8% of its stock value.
Amazon also faces nimble feeted competitors from Google to Ebay. It faces the risk of people turning on their search engines to find the best deals and search the books. One business prospect for Amazon is to host third party ads on its site using third party search technology such as Yahoo! or Microsoft. In this context, Microsoft might be a better partner for Amazon than Yahoo!
Amazon.com has fast growing sales that will keep boosting revenues for the next few years. However, the competitive landscape will be intense and cause some headaches to Amazon in the coming years. Amazon is a risky play but I wouldnt bet on the stock going down much. There is a lot of short interest in this stock which may prevent it from going down significantly. The more likely scenario is that the stock howers at the current levels for a long time.