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Assigned to Amazon.com, Inc.[購入]We are still getting ratings (NASDAQ: AMZN) shares.
In a previous Amazon article published on August 5, 2022, I focused specifically on analyzing AMZN’s acquisition of One Medical and how this will affect Amazon. rice field. Positioning in the healthcare industry. My attention turns to Amazon’s financial forecasts and business prospects for the coming year in this latest update.
I continue to believe that Amazon guarantees purchase ratings. Amazon currently trades at attractive mid-teens EV/EBITDA multiples, and AMZN’s current consensus operating profit forecast for fiscal 2023 is too conservative and likely to beat next year’s operating profit suggests that
AMZN Stock Key Indicators
Before I get to Amazon’s 2023 outlook, I’d like to highlight certain positive metrics released as part of AMZN’s latest Q3 2022 results.
Amazon announced its third quarter 2022 financial results after trading hours on October 27, 2022, and AMZN’s stock fell -7% to close at $103.41 the following day. Amazon’s stock fell another -1% to close at $102.44 at the end of the October 31, 2022 trading day.
The negative market reaction to AMZN’s third quarter 2022 results could be attributed to the company’s lower-than-expected fourth quarter sales and operating profit outlook.
Amazon expects to achieve total revenue of $144 billion in the fourth quarter of 2022 based on the midpoint of its guidance. That’s about -7% below the Wall Street consensus top-line forecast of $155.4 billion. Separately, AMZN announced his Q4 2022 operating profit guidance of $0-$4 billion. By comparison, sell-side analysts had previously expected Amazon to record an operating profit of about $4.7 billion in the final quarter of the year (before fourth-quarter guidance was issued). S&P Capital IQ data.
Beyond AMZN’s 2022 financial performance, I think investors should focus on the company’s outlook for the coming year, which is the subject of the next section.
Where will Amazon stock go in 2023?
We expect Amazon to post a significantly higher than expected operating profit in 2023.
Rather than focus on absolute expected financial numbers, it is important to look at Amazon’s incremental margins for Q4 2022, as implied in management guidance.
of Deutsche Bank (DB) A research report dated Oct. 28, 2022 (unpublished), titled “Batten Down The Hatches,” stated that AMZN’s “Fourth Quarter (2022 Management) Guide to Upper End Incremental Earnings Margin of 7 %, making it the third strongest.” 4th quarter incremental margin over the last 17 years. “
Incremental operating profit margin is calculated by dividing the change in operating profit between two accounting periods by the change in the top line for the same timeframe. In other words, Amazon’s relatively higher incremental margin guidance for Q4 2022 (compared to past years) means that for every additional dollar of revenue the company achieves going forward, it can deliver much higher incremental operating profit. It means thinking.
In my view, this bodes well for Amazon’s 2023 profitability and operating profit outlook. Specifically, productivity and capital spending are two key areas where the company’s profit margins have room to grow.
At the company’s recent Q3 2022 earnings call on October 27, 2022, AMZN emphasized that it wanted to be in a position to “quickly launch many (productivity) initiatives in the first quarter of next year.” did. There are many opportunities to improve productivity and continue to be cost effective. “
Separately, Amazon revealed in its third quarter investor briefing that it has “changed its plans going forward and has taken steps to reduce CapEx.” We were originally thinking 2022. “
Morgan Stanley (MS) previously published a report (private) on September 21, 2022 titled “Fulfillment Networks: Built to ’24”. 2024 based on that analysis. MS’ research supports his view that AMZN’s capital expenditures and fulfillment costs (on a unit basis) should be significantly reduced in 2023.
In summary, Amazon should see significant operating profit growth and margin expansion heading into 2023.
What Amazon Catalyst to watch in 2023?
I think there are two triggers for Amazon’s reassessment that investors should focus on next year.
One of the triggers is that Amazon exceeded market expectations with its actual operating profit for fiscal 2023.
According to consensus financial projections obtained from S&P Capital IQthe market now expects Amazon’s EBIT to grow +104% to $24.7 billion in fiscal 2023, with EBIT margin expanding +100 basis points to 4.3%. The consensus figure is still below the company’s actual 2021 EBIT of $24.9 billion, with an EBIT margin of 5.3%.
As I mentioned in the previous section, I believe AMZN is well positioned to generate higher than expected operating profit next year. Amazon’s fiscal 2023 operating profit and operating margin estimates are $27 billion and 4.7%, respectively.
Another catalyst is the return on AMZN’s share buybacks.
As revealed in its Q3 2022 10-Q filing, Amazon spent about $6 billion in share repurchases in the first six months of this year, but in the third quarter, it sold its shares. Didn’t buy back. As of September 30, 2022, AMZN still has approximately $6.1 billion remaining from its current share repurchase authorization.
Following the recent price correction, Amazon trades at a consensus forward of 14.7x the next 12-month EV/EBITDA multiple. S&P Capital IQ Evaluation data. By way of comparison, AMZN has a slightly lower 10-year trough EV/EBITDA multiple of 14.3x and a much higher average 10-year EV/EBITDA ratio of 22.2x. So, as long as AMZN’s valuation remains attractive enough to trigger a buyback, it’s likely that Amazon will accelerate the pace of its share buybacks from his Q4 2022 through his 2023. Reasonable.
If Amazon does execute a share buyback in the fourth quarter of 2022, this will be revealed as part of AMZN’s 2022 results and the 10-K filing, which is expected to be released in February 2023. A share buyback sends a strong signal to the market that AMZN’s stock is undervalued.
What is the long-term forecast for Amazon?
There is still room for Amazon to continue growing in the long term, despite its sheer size and market leadership in the e-commerce space.
AMZN’s revenue is projected to grow at a CAGR of +12.6% from FY2023 to FY2026. S&P Capital IQI believe Amazon should be able to meet or even exceed market consensus long-term growth expectations.
It should be noted that e-commerce penetration is not very high.Based on a June 2022 research report published by Morgan Stanley, the current global e-commerce penetration rate is only 22% and could rise further to 27% over the next four years. As such, I’m pretty positive about AMZN’s long-term growth prospects.
Should I buy, sell or hold AMZN stock?
AMZN stock remains a Buy-rated stock for me. Based on future EV/EBITDA metrics, we believe Amazon’s stock is undervalued, and the catalyst for AMZN’s revaluation, including better-than-expected operating earnings and a resumption of share buybacks, is in place.
