Amazon Stock Declines Following Q4 Report
Amazon’s (AMZN -1.81%) stock saw a sell-off after its fourth-quarter results announcement, despite a solid start to 2023 and a recovery of nearly 20%. Although the corporation was able to surpass experts’ projections for revenue, earnings fell short of expectations.
Slowing Revenue Growth Highlights the Balance Sheet
The bottom line, where investments in retail infrastructure and technology led to a large $18 billion operating deficit in 2021, has come under further scrutiny as sales growth slows.
Investment twice as much, twice as much potential
Amazon has more than quadrupled its capital expenditures over the past three years, which are mostly used to grow its retail and cloud services. Due to this increase in spending, earnings in 2020 and 2021 were eliminated, with a reported net profit of $33 billion on $469 billion in sales.
High Returns on Capital Expenditures in the Past
Amazon has a history of producing significant returns on incremental increases in capital expenditures, despite the short-term earnings loss. The company’s capital expenditures increased from around $4 billion to almost $64 billion between 2012 and 2022, which led to an added $452 billion rise in revenue. This translates to an increase in income of $7.56 for every dollar invested in fixed assets.
A Methodical Approach
It is clear that the company’s capital allocation policy has not changed from its investor communications now to those from 10 years ago. Amazon made investments in technical infrastructure and extra capacity to support its fulfillment network in 2012 and the years that followed.
The Most Valuable Brand in the World
According to Brand Finance, these characteristics have given Amazon a significant competitive edge and made it the most valuable brand in the world.
Future Prospects for E-Commerce
According to eMarketer, the value of e-commerce is expected to increase from $5.5 trillion in 2022 to $7.4 trillion by 2025, thus investors may anticipate Amazon to keep paying them back for their investments. Jeff Bezos, the CEO of Amazon, promised investors in a letter he wrote to them in 1997 that the business would “continue to spend aggressively to develop and leverage our customer base, brand, and infrastructure.” The current market decline may be a fantastic time to invest in Amazon’s bright future.