Dave Kranzler takes a dive into Amazon’s most recent earnings statement and finds out the real story why Amazon “beat the Street”…
I wrote the following analysis on Amazon.com’s GAAP accounting manipulation for Seeking Alpha…
Amazon.com (AMZN) released its earnings on Thursday, February 1st after the market closed. The headline net income number was $3.85/share. This blew away Wall Street’s estimate of $1.85/share, which is a bit peculiar since the traditional “beat the Street” earnings game is accomplished by guiding Wall Street analysts to an earnings consensus that is slightly below the posted result.
The revenue growth rate was truly impressive. For Q4 2018 vs. 2017, revenues jumped 38.2%. For the full year, revenues grew 30.8%. However, without question AMZN’s free 2-day shipping associated with its Prime membership is the driving force behind sales growth. But at what cost? The table below shows AMZN’s revenue growth rate plus cost and operating margins from 2005 – 2007. The data is from AMZN’s 10-k filings.
Cost of fulfillment is the cost of de-stocking an item and getting it to the customer’s doorstep. The fourth line item above shows fulfillment costs over time. As you can see, the cost of fulfillment as a percentage of revenues has doubled since 2006. For every dollar of revenue, AMZN spends nearly 23 cents getting inventory delivered to end-users.
You can read the rest of this article here: Amazon’s Deceptive Accounting Games
I also publish the Short Seller’s Journal, which is a weekly newsletter that provides insight on the latest economic data and provides short-sell ideas, including strategies for using options. You can learn more about this newsletter here: Short Seller’s Journal information.
I’ve been subscribed for a number of months now and really appreciate your newsletter. It has been quite profitable. In fact I had bought the $15 August puts BZH, Bought at $0.70 – yesterday $1.82 – 160%. Other recommendations have also paid off well. Thanks again for your hard work. – subscriber feedback