Even as the threat of economic slowdown related to Coronavirus looms, American investors are finding new reasons to be confident in the stock market. Earnings season is in full swing, and Amazon (NASDAQ: AMZN) is the latest major company to reveal strong earnings from the previous quarter.
Amazon’s stock was up more than 10% in after-hours trading on Thursday. It could climb even higher before the end of the week.
Record Revenue and Strong Earnings for Amazon
The eCommerce and technology giant had previously predicted a disappointing holiday quarter, but the numbers came in better than ever before.
Amazon reported $3.3 billion in profit from the holiday quarter, with sales revenue of $87.4 billion. This put earnings per share at $6.47 for the quarter. This was an impressive sequential increase and completely eclipsed the average analyst estimate. It was expected that earnings per share would be closer to $4.04.
The numbers also compare favorably to the same result a year ago. In the 2018 holiday quarter, Amazon earned $6.04 per share from sales of $72.38 billion.
The strong earnings growth is a reflection of Amazon’s popularity, its continued dominance of online retail, and the strong consumer market in the United States. America is now in its longest-ever period of expansion. Households have received tax breaks and real wages are rising. This means that people are spending more.
The Latest Report Could Break a Disappointing Cycle
Amazon stock has underperformed mega-cap peers like Microsoft and Apple over the last year. This latest earnings report could reinvigorate interest in the stock. Thursday’s impressive growth is a good sign moving forward.
Amazon’s business fundamentals are strong. Its Amazon Web Services (AWS) cloud business is performing well, and still has the largest share of the cloud computing market. North American online retail sales were up 21% throughout the fourth quarter.
Amazon Prime memberships are also helping to drive revenue and create repeat business for the company. CEO Jeff Bezos announced on Thursday that “We now have over 150 million paid Prime members around the world.” The service gives customers free two-day delivery, a paid two-hour delivery service, and other perks like streaming music and video.
Should Investors Consider This Pricey Stock?
Amazon’s previous underperformance could be related to its pricey stock, which currently trades for more than $2,070 per share. A stock split would possibly increase demand, but Amazon has shown no sign of considering this.
Even at today’s price, impressive growth will make the stock appealing to the right investor. 52 weeks ago, the stock was trading at $1,566. Strong returns are likely for investors who can overcome the high buy-in.
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