By: GZ on Mercoledì 28 Gennaio 2004 02:11
Ho riportato l'ottima discussione dei risultati di Amazon qui come riferimento per quanto discusso.
AMZN -- 5 p.m.
Scott Rothbort analyzes the Amazon earnings call at 5 p.m. EST.
Amazon (AMZN:Nasdaq) earned 17 cents on a GAAP basis and 29 cents on a pro forma basis for fourth-quarter 2003 on net sales of $1.946 billion. This is in line with analysts' pro forma estimate and beats analysts' revenue estimates of $1.87 billion. For the full year, the company reported 8 cents in the black on a GAAP basis, and 61 cents on a pro forma basis. Free cash flow from operations for the quarter was $464 million and $346 million for the year.
The company has also announced that it will redeem $150 million of its outstanding 4.75% Convertible notes due 2009 at a price of $102.375. After the redemption there will be $900 million outstanding.
The stock closed at $55.74 in today's regular session. Initial reaction to the earnings release moved the stock higher by about a point. The stock is now trading around $54. There may be two reasons for this reaction (which are not mutually exclusive). First, we had a buy to cover the shorts followed by a sell on the news. Second, an adverse reaction to the loss the company will incur, which I estimate at around $3.5 million. Needless to say, after hours trading will be very volatile.
When we look at the earnings numbers and the bond redemption, we must remember that AMZN pays zero tax since it is still working off huge tax-loss carryforwards. More on the call at 5 p.m. EST.
As the call begins and the Safe Harbor is being read, I want to note that the stock is trading most erratically and is now down about $1 from the regular close.
In addition, Jeff Bezos will only be available for Q&A.
Four hundred thirty three million shares outstanding are flat with a year ago.
Active customer accounts increased 26% to 39 million.
Inventory averaged 4% of annual sales.
Investment in fixed asset declined by 6% from the year ago.
Cash and marketable securities up to $1.3 billion -- includes foreign exchange, or forex, benefits.
Will redeem additional $150 million of convertible debt in first-quarter 2004. The charge will be in first-quarter 2004 results.
Will repurchase or redeem an additional $500 million in debt over time.
Third-party sales grew to 24%.
Electronics and general merchandise up 22% and 30%, excluding toys and baby products. (Hmm -- I guess that they are not capturing the lost Toys 'R Us sales.)
$6 million benefit from foreign-exchange rates.
Scott's thoughts: About 1.5 cents per share or almost 10% of net income for the quarter. I might also add that the higher revenue over analysts' estimates did not flow through to the bottom line.
Extended by four days in December free "Super Saver" shipping.
Shipped 99% of all orders to meet holiday deadlines.
OK -- now tell me -- what did free shipping cost the company. Will they ever break this metric out?
High level of uncertainty in foreign exchange and the global economy.
First-quarter 2004 net sales between $1.39 and $1.49 billion.
First-quarter 2004 operating income: $90 million to $115 million.
Full-year 2004 sales between $6.2 billion and $7 billion. (Note: Right now the analyst average is $6.21 billion.)
FY operatng income $430 million to $530 million.
Will measure success by free cash flow.
Q. In this quarter we saw unit growth and revenue growth move together. Is the third-party business in a steady state?
A. We will continue to add selection. It is up to the customer. Not giving guidance on third-party mix for 2004.
Q. On capex you said $100 million. Can you clarify?
A. Will be less than $100 million. Do not anticipate a new automated fulfillment center in 2004.
Q. Emphasis on pricing relative to selection?
A. Don't look at them separately. Not linked and are not tradeoffs.
Q. Your gross margin in the December quarter was the lowest n some time. Is 29.1% plus or minus 1% to be expected?
A. We are not giving guidance on gross margins going forward. You should expect to see year-over-year pressure on gross margins.
There you go, AMZN is getting squeezed and it will take organic growth just to tread water. I think investors and analysts will pick up on this answer in a negative way -- as they should.
Q. Focus on nonmusic and book sales which were up 22% -- a significant deceleration?
A. Looking at the total-year EGM, or electronics and general merchandise, growth was 29%. Pleased with the apparel business.
Q. Fourth-quarter unit growth?
Q. With a fairly substantial drop in international gross margins, how long will it take to stabilize? Will it accelerate because you are cutting prices overseas? Why be the price leader given 30% growth?
A. Will not give gross-margin guidance. Expect to see continued pressure in gross margins and higher operating profits. What matters to customers is convenience, selection and pricing.
Warning Warning -- AMZN gross-margin issues and their failure to guide on that metric will hurt them.
As the call concluded, I noticed that AMZN was trading at after-hour lows below $54. If you are looking for positives there certainly are some here.
The company has now put together a string of two-consecutive GAAP bottom lines. Cash flow is excellent, and by paying down expensive debt, the balance sheet will improve.
I do feel that the negatives outweigh the positives. First, higher revenues without a better bottom line signal that there is trouble in paradise. Margins are a problem, and they likely would look worse if there was no forex benefit. Management's evasive nature, vis a vis margin guidance, is a tell-tale sign that not is all rosy.
Second, this is the first earnings release for AMZN that I recall the stock trading down. Perhaps the momentum is finally out.
Third, AMZN had the wind at its back in the holiday quarter due to bad weather keeping shoppers online rather than in stores. I don't expect this to occur next year.
Finally, if AMZN did not have the luxury of tax-loss carryforwards, the results would not look so hot. The bottom line with this stock is always the same. On a valuation basis it is a short, yet on the other hand, the beta-chasing, momentum-loving, liquidity-driven investors don't care about valuation. A breakdown in the stock price could change all of that