Exclusive update by Joe Magyer
Amazon was back in the black in the fourth quarter of 2012. Operating income rose 55.7% on the back of wider gross margins and 22% higher sales. What fired up investors, though, was the climb in gross margin to 24.1% — Amazon's highest mark in a fourth quarter since 2001. The margin widened thanks to a higher mix of sales coming from third-party sellers and success from its budding advertising platform. Look for those trends to continue throughout 2013.
Not everything was rosy. Amazon's bottom line continues to look like a crime scene — the company posted a small GAAP loss in 2012 and its operating profit fell 21.5% for the full year. I was also nonplussed with first quarter sales growth guidance of 14% to 26%, the midpoint of which marks a slowdown and is below my expectations for Amazon's 2013 full year. And paid unit growth, which clocked in at 32% and was likely double the growth rate of U.S. e-commerce in the fourth quarter, was meaningfully lower than the third quarter's 39% year-over-year gain.
All told, though, this was a strong quarter for Amazon, which becomes more dominant by the quarter. The stock is richly valued at $283, though, and patient investors should consider waiting for a price below $260 to buy with some semblance of a margin of safety.
