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Amazon.com, Inc. (AMZN) Earnings: Will the Growth Story Continue?

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The powerful Amazon.com, Inc. (NASDAQ:AMZN) is in pole position to capitalize on a number of secular trends in the long run. Ranging from core retail to tablets to its third-party (3P) business, all are poised to gain incremental share from most of the categories. And Amazon.com, Inc. (NASDAQ:AMZN) will receive substantial tailwinds from consumer shifts towards media consumption online, and more customer acceptance in shopping online, especially in international markets.

Strong growth numbers

In the last quarter Amazon.com, Inc. (NASDAQ:AMZN)’s revenues grew a healthy 22% Y/Y to $16.07 billion. The company’s operating income stood at $181 million and its net income stood at $82 million. Amazon.com, Inc. (NASDAQ:AMZN)’s customer accounts have increased to more than 209 million customer accounts. On a comparative basis, eBay Inc (NASDAQ:EBAY) has roughly 120 million active customers on its marketplaces business, so Amazon.com, Inc. (NASDAQ:AMZN) has the ability to drive its gross merchandise volume (GMV) to much higher levels compared to eBay Inc (NASDAQ:EBAY).

Amazon.com, Inc. (NASDAQ:AMZN) is growing faster than the e-commerce space as well. According to comScore, non-travel e-commerce grew 16% in May ’13. Amazon’s same-store-sales (SSS) growth in June 2013 stood at 30.6%, and eBay Inc (NASDAQ:EBAY)’s SSS stood at 17.7%.

In addition, Amazon’s paid unit growth is growing at a healthy clip of 30%, and third party sales made up 40% of total paid unit sales. As Amazon is starting to sell more digital units compared to physical units, the company’s growth in digital unit sales is increasing at a faster pace. And as Amazon is selling more Kindles and other hardware, the company’s future sales of digital content, including e-books, music, movies etc, should grow its Media sales across the globe.

International markets are a big opportunity

In the last quarter, Amazon’s revenue growth in North America stood at 26% Y/Y, and the International growth stood 16%. However, Amazon faced a lot of macroeconomic and currency headwinds, which impacted its revenue growth. Amazon’s FX exposure, primarily to the pound, euro, and yen, swung the company’s fortunes downward.

Amazon’s net shipping costs, which is a number investors look for keenly, stood at $763 million or 4.7% of total worldwide sales. Amazon is still making big investments in a handful of the 10 countries it operates to grow its businesses. And Amazon’s CFO stated in the last earnings call that the company’s growth in unit sales in International is much higher than the revenue growth of 16%. Amazon will almost certainly expand its reach in newer markets, increase selection and develop a massive online platform. And Amazon can easily grow its top-line revenues at a double digit rate sustainably for years, as the company can earn more revenues from its higher margin businesses.

Higher margin segments

The recent and increased optimism among investors surrounding Amazon has been related to the company’s solid margin expansion. Amazon has seen its gross margin in 1Q13 expand to 26.6% compared to 24% in 1Q12. Non-retail businesses, including Amazon Web Services, advertising, Prime and its third-party business, have much higher margins compared to its core retail business.

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