Amazon (AMZN) Hits 52-Week High On Strong Earnings In Q1

Shares of Amazon.com Inc. (NASDAQ:AMZN) touched a new 52-week high of $724.23 on May 31, eventually closing at $722.79. The company returned 67.7% in the past one year and has added roughly 6.94% year to date. Average volume of shares traded over the last three months was approximately 4,109K.

What's Driving Amazon?

Amazon is one of the largest online retailers in the world. We continue to believe that its platform strategy and Amazon Web Services (in which it has significant first-mover advantage) will spur growth in the future.

The price appreciation may be attributed to Amazon’s strong fundamentals, solid growth of AWS, its cloud service, and better-than-expected first-quarter 2016 results reported on Apr 28. Since then, the stock has gained 20.0%.

In the first quarter, Amazon reported profit of $1.07 per share that surpassed the Zacks Consensus Estimate of 61 cents. The North America and AWS segments were strong contributors to profits while investments in international markets continued.

Amazon’s revenues in the quarter were down 18.5% sequentially and up 28.2% from the year-ago quarter. Excluding the $210 million FX impact, revenues would have been up 29% year over year.

Also, management provided a solid guidance for the second quarter of 2016. Revenues including the70 bps positive FX impact are expected to come in at $28.0–$30.5 billion (up 0.4% sequentially and 26.2% year over year at the mid-point). The Zacks Consensus Estimate is pegged at $28.1 billion.

The company’s cloud infrastructure service, AWS, continues to grow strongly. The success of its multi-faceted cloud computing service significantly boosted the company’s first-quarter results. AWS contributed $2.57 billion to revenues, taking the revenue runrate to over $10.2 billion.

Another growth driver is Prime subscription service. Prime users pay a yearly fee of $99 to receive benefits like free two-day shipping, special sales and Amazon Instant Video. As Prime users pay for the service, they typically try to use it as much as possible thus boosting sales for Amazon.

Fulfillment centers are also important since they are essential for providing the level of service that Amazon customers are accustomed to. Over the past one year, the giant online retailer has been investing heavily in fulfillment and technology & content.

Other areas of potential growth are devices and IoT. Though IoT devices/technologies will not have a huge impact on results in the near term (as revenue contribution won’t be material in the near term), these could very well supplement the rest of the business by making it purchase from Amazon easier.

Amazon has taken an aggressive stand to maintain supremacy in its chosen markets and its performance so far in the first quarter indicates that it is moving in the right direction.

Moreover, the Zacks Consensus Estimate for earnings jumped a massive 327.6% for full-year 2016. Additionally, the company delivered an average positive earnings surprise of 133.55% in the trailing four quarters backed by its robust business portfolio.

Amazon currently carries a Zacks Rank #3 (Hold).

Stocks that Warrant a Look

Some well-placed stocks in the technology space are CommVault Systems, Inc. (NASDAQ:CVLT) and DST Systems Inc. (NYSE:DST) , sporting a Zacks Rank #1 (Strong Buy), and Manhattan Associates, Inc. (NASDAQ:MANH) , carrying a Zacks Rank #2 (Buy).

DST SYSTEMS (DST): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

COMMVAULT SYSTM (CVLT): Free Stock Analysis Report

MANHATTAN ASOC (MANH): Free Stock Analysis Report

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