Amazon.com, Inc. (NASDAQ:AMZN) finally showed Wall Street that it can generate profits after posting stellar results for the fourth quarter having been on the receiving end in the recent past over suppressed margins. A net income of $214 million or $0.45 a share for the quarter was enough to excite the Street allowing the stock to enjoy an upward swing. Monness, Crespi, Hardt & Co equity analyst, James Cakmak, during an interview on CNBC, questioned whether the online giant can be able to sustain the generated profits in the long term.
Following two consecutive quarters of losses Amazon.com, Inc. (NASDAQ:AMZN) posted sales of $29.33 billion for the fourth-quarter a 15% growth but slightly below analyst estimates of $29.67 billion. Full-year net sales grew by 20% to a high of $88.99 billion compared to $74.45 billion generated in 2013.
“The question is this the company that is able to be profitable and I think they proved that in the fourth quarter. The quarter in itself exceeded expectations. The first quarter outlook more in line just slightly lower but at the end of the day the question is this a sustainable a model for them in terms of profitability as we go forward,” said Mr. Cakmak.
Keeping up with the momentum in the fourth quarter, Amazon expects to generate net sales of between $20.9 billion and $22.9 billion in the first quarter, which would be a 6% and 16% growth compared to last year.
Amazon.com, Inc. (NASDAQ:AMZN) CEO, Jeff Bezos, has in the recent past come under increased scrutiny over the company’s push to pursue other investments that have only resulted in increased expenses consequently affecting margins. The analyst does not expect any change of heart from the CEO in terms of pursuing investment opportunities having already generated profits in the fourth quarter on the same model.
Amazon.com, Inc. (NASDAQ:AMZN) has been making massive investments in China, India and recently announced plans to tap into the movie industry through content creation. Cakmak expects investments in this areas and sectors to pay up in the long term in terms of returns.
Despite the impressive results for the quarter, the analyst maintains a ‘neutral’ rating on the stock with a share price target of $320.
“While we may be able to see the profits this quarter may be over the next couple of quarters will translate to the topline. We think while this is currently become a profit story from what used to be a revenue story. We think it may revert back to having higher revenue expectations, which is one of the reasons we are on the sidelines today,” said Mr. Cakmak
Despite the Fire phone being dubbed a flop in the industry, Cakmak believes Amazon.com, Inc. (NASDAQ:AMZN) may look to develop other iterations in the future as Bezos seeks to connect more customers on the same front.
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