This is not how the supposed earnings pace works: On Thursday, Amazon (NASDAQ: AMZN) reported a staggering $ 12.37 per share (Wall Street predictions of only $ 7.41) on sales of $ 96.1 billion, also beating its 92.7 estimate. billion dollars of street. The e-commerce giant then tracked its huge earnings momentum with predictions that during the fourth quarter of the big holiday holiday it would increase revenue to $ 112 billion and possibly as much as 121 billion. USD.
Wall Street thinks Amazon will only generate revenue of $ 112.3 billion in the fourth quarter.
But despite it all, investors are selling off Amazon shares, which fell 5.5% as of 1:20 p.m. EDT on Friday.
Compared to a year ago, the third quarter saw revenue increase 37%, operating income up 96% and net income per share diluted by 192%. About the only thing that could be the “bad news” for the quarter was the fact that free cash flow fell from $ 3.2 billion a year ago to $ 901 million as Amazon invested heavily to cope with the wave New business from consumers locked in the pandemic.
And even in the free cash flow (FCF) realm, Amazon results over the past 12 months show FCF of $ 29.5 billion, up 26% from $ 23.5 billion a year ago.
So what now
So are investors right or wrong to sell off Amazon stock today?
Stocks have been priced for perfection towards third quarter earnings. It works flawlessly, has been sold off nonetheless and is still trading for a staggering 51.4x FCF. Even if management is forecasting 38% sales growth for the next quarter and even with everything else that works for the company, I can’t help but conclude that Amazon shares aren’t a big deal.
If I were a shareholder today, I think I would take 80% of my profits from the past year and sell my Amazon stock.