3 Questions That Matter Heading Into Amazon's Fourth-Quarter Report
Earnings season is kicking into high gear as Amazon (NASDAQ: AMZN) reports its fourth-quarter earnings on Thursday. Shareholders will be paying close attention to the company's growth rates in its various business lines as well as its profitability. For Amazon, faster growth typically means somewhat lower profit margins, because the company needs to spend heavily to grow as quickly as possible. With that in mind, here are my three biggest questions for Amazon heading into fourth-quarter earnings.
The growth rate of Amazon's e-commerce business has been slowing in recent years. Online store sales growth slowed to 13.5% in 2018 from 18.5% in 2017, and it slowed further to 9.5% in the first quarter of last year. That's when Amazon began aggressively investing in converting Amazon Prime's two-day free shipping perk to one-day free shipping. This investment cost the company over $800 million in the second quarter and an undisclosed larger amount in the third quarter, and management expected it to cost around $1.5 billion in the fourth quarter.
The result was online store sales accelerating from 9.5% in the first quarter to 14.3% and 20.6% in the second and third quarters, respectively. Similarly, e-commerce units shipped accelerated from 10% growth in the first quarter to 18% and 22% in the second and third quarters, respectively. Clearly, these investments have been paying off in a big way.
Source Fool.com
