Amazon’s founder Jeff Bezos will step down as CEO and become the e-commerce giant’s Executive Chairman in the third quarter of this year. Andy Jassy, head of Amazon Web Services, will succeed Bezos.
The management reshuffle announcement coincided with the company’s earnings release. Amazon (AMZN) reported 4Q EPS of $14.09, beating analysts’ estimates of $7.23. Revenues for the quarter increased 44% year-on-year to $125.6 billion and came in ahead of the consensus estimates of $119.7 billion.
“Amazon is what it is because of invention. We do crazy things together and then make them normal,” Bezos commented. “If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention.”
Looking ahead, Amazon expects 1Q FY21 revenues to generate between $100 billion to $106 billion, a growth of 33% to 40% year-on-year. Amazon stated that this revenue guidance anticipates a favourable impact of around 300 basis points from foreign exchange rates. (See Amazon stock analysis on TipRanks)
Operating income in the first quarter is anticipated to be between $3 billion to $6.5 billion versus $4 billion during the same period last year. The forecast assumes $2 billion in costs related to COVID-19.
Following the earnings results, Guggenheim analyst Robert Drbul raised the stock’s price target from $3,600 to $4,000 and reiterated a Buy rating.
Drbul said, “On the quarter, revenue grew 44% (vs. our +38% est.) and EPS was nearly double our estimate ($14.09 vs. our $7.29), as high-margin businesses performed well (AWS, advertising, 3P sales, subscriptions) and leverage was generated on strong volume. We raise our 2021 estimates and introduce 2022 forecasts.”
On the transition of the current CEO, the analyst commented, “We expect Jeff Bezos to remain involved in key company decisions and a smooth transition at the CEO level, as Mr. Jassy is a seasoned Amazon veteran.”
The rest of the Street is firmly bullish about the stock with a Strong Buy consensus rating. That’s based on 18 analysts recommending a Buy. The average analyst price target of $3,933.24 implies 16.4% upside potential to current levels.
If Amazon is compared to other stocks in the technology space using TipRanks’ Similar Stocks tool, it scores a 9 out of 10, along with Microsoft, which indicates that the stock has a high likelihood of outperforming the market.
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