Amazon (AMZN.US) released earnings report for calendar Q4 2020 yesterday after the close of the Wall Street session. Company reported record revenue and earnings as changes in consumer habits triggered by the coronavirus pandemic continue to boost e-commerce sales around the world. Let's take a closer look at Amazon earnings report.
Headline results
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Create account Try a demo Download mobile app Download mobile appAmazon (AMZN.US) reported a 43.6% year-over-year increase in Q4 sales with revenue coming in at $125.56 billion (exp. $119.70 billion). Net income increased 121% year-over-year to $7.22 billion (exp. $6.1 billion) while earnings per share reached $14.09 (exp. $7.34). While the company's gross margin declined from 38.27% in Q4 2019 to 36.85% in Q4 2020, its net margin expanded from 3.74% to 5.75%. Product sales accounted for 56.6% of total revenue, down from 57.8% in Q4 2019, while share of services sales increased to 43.4% from 42.2%. Results highlight that services, like for example AWS cloud, are becoming more and more important for the company.
Difference between revenue and earnings growth
Amazon income statement for Q4 2020. Data in USD millions (EPS data in USD). Source: Amazon, XTB
Taking a look at the headline results, we can see a big difference between growth rates of revenue and net income. Where did it come from? Let's take a look at the key positions from Amazon's income statement for Q4 2020 (in the table above). We can see that growth in growth profit has outpaced growth in operating expenses resulting in a much higher growth rate of operating income than growth of revenue. Even a higher growth rate at pretax level was achieved thanks to a big jump in non-operating income. However, income tax expense looks the most interesting here. In spite of pretax income increasing, Amazon paid less income taxes than it did in Q4 2019 - $566 million in Q4 2020 compared to $786 million in Q4 2019. Should effective tax rate remain unchanged between two periods, Amazon would have $1.505 billion in income taxes - almost $1 billion more than it did. Summing up, high growth rate of earnings compared to revenue growth can be ascribed to better management of operating expenses as well as savings made on income taxes.
Share price of Amazon (AMZN.US) managed to break above a key obstacle yesterday. Resistance zone at $3,335 was not only marked with previous price reactions but also with the upper limit of a triangle pattern. According to classic technical analysis, this is a continuation pattern therefore there is a chance that the stock will resume an upward move that was halted in mid-2020. Stock is trading more or less flat in pre-market and the near-term resistance to watch can be found at $3,500, slightly below all-time highs. Source: xStation5
