To The Moon

$Amazon.com(AMZN)$

One of the most intriguing companies, Amazon, made headlines recently—Amazon is still the loudest voices online. We'll dive into that soon.

Amazon has long been one of my top three highest-conviction holdings, so let’s take a closer look at their latest earnings. As always, I like to compare their actual results with the guidance they provided in the previous quarter to see how well they delivered on their own expectations. Fortunately, Amazon makes this easy by clearly outlining their financial guidance in their earnings reports, using straightforward numbers and plain language—so, Amazon, thank you for that!

For Q4, Amazon projected net sales between $181 billion and $188 billion, representing a growth rate of 7-11%. They also forecasted operating income between $16 billion and $20 billion. Now, let’s see how they performed.

Amazon reported Q4 net sales of $187.8 billion, landing right at the top of their guidance range. Meanwhile, operating income came in at $21.2 billion—exceeding their own forecast by $1.2 billion. On the surface, that’s already an impressive result, but let’s dig deeper.

AWS, Amazon’s cloud segment, saw net sales grow by 19%, matching last quarter’s growth rate. Earnings per share came in at $1.86 per diluted share, compared to just $1 per share a year ago—an 86% year-over-year increase. That’s an incredible earnings jump, especially for a company of Amazon’s scale.

Looking at Amazon’s performance versus Wall Street estimates, they’ve consistently outperformed over the past year. While growth has slowed slightly, the numbers are still remarkable—earnings growth of 200%, 93%, 52%, and now 86%. Even though estimates suggest future growth might moderate to 37% or even 12%, double-digit earnings growth remains impressive.

However, despite these strong results, Amazon's stock fell over 4% on Friday. So, what’s going on?

The answer likely lies in their forward guidance. For the next quarter, Amazon expects net sales between $151 billion and $155 billion, representing a growth rate of just 5-9%. That’s the first time in a while that Amazon has projected growth below double digits. Additionally, they forecast operating income between $14 billion and $18 billion—meaning that if they land on the lower end of that range, operating income would actually decline compared to last year.

Amazon also disclosed that their Q4 capital expenditures (capex) totaled $26.3 billion and that they expect a similar spending rate in 2025. That implies over $100 billion in capex for the next year, which is a massive investment.

Looking at their investor presentation, we can see how strong Amazon’s operating income trajectory has been over the past couple of years, particularly with AWS. Free cash flow has also been trending in the right direction, showing the company’s ability to generate cash efficiently.

This quarter, Amazon's growth is relatively modest at just 4% year-over-year. When you factor in their plans to invest $100 billion in capital expenditures over the next year, it's easy to see why some investors are getting concerned.

That being said, what are my overall thoughts on Amazon? I believe we're seeing a situation similar to what happened with Google—where they reported a strong quarter, yet the stock sold off due to concerns about future growth.

I've been discussing Amazon for about a year now, during which the stock has risen around 34%. Looking further back over the past two years, Amazon is up over 160%, with its business experiencing significant profitability growth. What we're likely seeing now is investors taking profits after an incredible two-year run, while also anticipating slower growth moving forward. The company has already indicated that heavy capital expenditures are on the horizon, and their year-over-year comparisons are now against 2024—a standout year—making it harder to maintain high growth rates.

So, does that mean it's time to sell Amazon? The answer depends on your investment goals. In my view, Amazon remains one of the best companies in the world. While growth may slow and capital expenditures could impact earnings and cash flow in the short term, the core reasons I liked Amazon a year ago are still valid today.

This brings up an important point—just because Wall Street or hedge funds are selling Amazon, does that mean you should too? The key question to ask is: What is their investment timeline compared to yours? Do you share the same goals and risk tolerance? Following someone else's trades without understanding their strategy doesn't make sense.

Stocks don’t move in a straight line—they go through cycles, ups and downs. If your approach is more active trading, where you sell at peaks and re-enter at lower points, then do what aligns with your strategy. But for me, Amazon and big tech as a whole remain some of the strongest companies in the market. Even if growth slows, they are still generating strong earnings, and over the long term, that translates to success. So in my opinion, Amazon is still a great company.

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Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.