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January 27, 2012

Amazon Q4 2011 Results Preview and Cheat Sheet.

Amazon is set to report their much waited for Q4 earnings next week (Tuesday - January 31) and here's a preview of what we'll be watching.

Reminder on the ChannelAdvisor SSS Data

Our customers (largely US EGM), enjoyed these growth rates on Amazon in Q4:

  • Oct: 80.1%
  • Nov: 60.6%
  • Dec: 51.3%
  • Q: 53%

What Amazon usually says that we'll be watching...

Amazon reports on ~12 metrics that we follow very closely as they are the best indicators for how Amazon did as a first-party, third-party (seller business) and are the strongest signal for all of e-commerce health.

  • Revenue and Revenue Growth - Amazon's revenue growth is really the bar against all other companies in the space are measured.  Amazon's guidance was wide implying growth in the 27-44% range - will they exceed that?
  • EPS - Wall St. is watching this very closely as there is a ton of concern over Amazon's relentless investments in FCs, DCS, Kindles, Prime, etc.  Wall St. worries will the co ever generate profits from these investments? How long will the cycle last?
  • US/Intl growth - Amazon reports sales across two geographies - US and non-domestic (intl) - we look at these rates to get a feel for where Amazon's investing and seeing growth globally.
  • Media/EGM growth - Unlike eBay that reports copious category detail (see here for their Q4 results and category details).  That being said they do give us two which is better than 'nothin - Media (books, music, video, video games and I think kindle ebooks) and EGM - stands for Electronics and General Merchandise.  This is essentially everything but media - CE, sporting goods, H+G, etc.
  • Marketplace health - Finally we look at items that really relate to the marketplace. Specifically what is the % of 3P sales? (was 38% last Q - a high water mark) What is the active user base doing (has been growing robustly - was 152m in Q3) and finally paid unit growth.

I realize that's a lot to process so we've put it all in a handy-dandy table with three columns:

  • Wall St - this is where the Wall st analysts believe the co will be
  • Amazon guidance - this is what Amazon has told Wall st - usually a range and Wall St. usually focuses on the midpoint of that range.
  • Notes - Here we put some data in there to help give you a feel for how the results stack up to previous performance (e.g. Q3 or year ago0.

On the evening of the release, we'll drop the actuals into a new column so you can more easily see how Amazon did against their own guidance and Wall St. expectations.

Amzn_q4_preview

What Amazon won't say (but we wish they would)

Amazon is very tight-lipped on a bunch of topics that we wish they would talk more about.  On top of our list is:

  • More category data!  We are seeing their auto parts biz, SG, CSA, really do well, but it's hard to compare when we can't see the details like we can see for eBay.
  • Kindle Fire details -We'd love to know how many Fires were sold in Q4, but don't expect anything.  Most estimates are in the 5-6m unit range
  • Prime - We estimate 10-12m Prime members, almost doubling in 2012.  Prime members spend 4X non-prime, so we estimate they represent 40% of the buyer wallet.
  • More marketplace metrics - It was exciting to see some of the tidbits they released in Q4 (Dec 29 press release titled 2011 is Best Holiday Ever for Kindle) - maybe (but probably not) they will shed some more light on the 3P.

2012 Guidance

Since Wall St. is very much a 'what have you done for me lately' kind of a game, 2011 results will actually not be the focus as all eyes will be on Amazon's top and bottom line guidance for Q1 2012 (they only do a Q at a time, not annual like eBay and others).  Right now Wall St. is projecting $12.6-$13.6bn - anything below the mid-point there would be a disappointment and anything above would be a 'raise'.  Knowing Amazon, they are pretty conservative on these things, so I wouldn't expect a raise here unless they are feeling inordinately bullish.  

 

Finally, as mentioned in the Q4 EPS discussion, there is a ton of concern around Amazon's investment level.  If the Q1 EPS is low, or (horror of horrors) goes negative for a bit as Amazon continues to invest, you'll see a big separation of bulls and bears and the stock will probably take a beating for a while, until Amazon pr0ves that the investments made total sense and they continue to grow at 3-4X of e-commerce and take share much to everyone's surprise (we've seen this movie before ;-).

 

How do you think Amazon will do?

We'd love to hear your thoughts on Amazon and what you'll be watching.  Do you think they are immune from the softness we saw in eBay and Google or will they face EU and macro headwinds? Sound off in comments.

SeekingAlpha Disclosure - I am long Google and Amazon. eBay is an investor in ChannelAdvisor where I am CEO.

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