3 Things to Watch When Amazon.com Releases Earnings

Investors need to keep an eye on sales growth, cash generated from operations, and Prime membership numbers.

Jan 29, 2014 at 10:00PM

Amazon.com (NASDAQ:AMZN) reports earnings tomorrow after the market closes. Below are the three keys things that I'll be looking for: 

1. Sales growth better than 20%, or more than $26 billion in revenue
Sales growth is a sign of Amazon.com's continued ability to gain scale and put distance between itself and competitors. We've seen weak holiday results from a number of retailers, particularly brick-and-mortar stores like Best Buy. I'm hoping that Amazon.com will buck the negative retail trend because of its e-commerce strength. This past quarter, eBay sales increased 13% -- I'd expect Amazon.com to grow faster than that.

2. Operating cash flow of more than $5.5 billion or more
Like many other retailers, Amazon.com does a large share of its business during the fourth quarter. And, historically, this is the quarter when Amazon.com generates large amounts of operating cash flow. In the past three years, it has generated $3.5 billion, $4.3 billion, and $5.1 billion in operating cash flow during the fourth quarter. I'm hoping the company will improve and generate at least $5.5 billion in operating cash flow.

3. Millions of new Prime members
Prime membership is a strong indication of customer loyalty at Amazon.com. Although Amazon.com doesn't officially disclose the number of Prime members, I'm hoping they change that policy. Or, at least, I'd like some further guidance on the conference call regarding new Prime members. The company recently issued a press release indicating that it had "tens of millions" of Prime members, and that "more than one million customers around the world became new Prime members in the third week of December." I'd like to hear more about that.

Foolish bottom Line
These are my three biggest things to watch. But I have to be honest... even if Amazon.com misses on those key items, I wouldn't be too disappointed. Amazon.com is an amazing company with a long-term outlook, so I wouldn't overweight the importance of a single quarter. As long as Bezos is at the helm, I'm willing to forgive any quarterly missteps because, like Bezos, I'm focused on the long term.

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Brendan Mathews owns shares of Amazon.com. Brendan Mathews is short shares of Best Buy. The Motley Fool recommends Amazon.com and eBay. The Motley Fool owns shares of Amazon.com and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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