Wall Street didn't show much love for Amazon (NASDAQ:AMZN) after its earnings report last week, but then, the market does have a weakness for short-term thinking. Yes, management's projections for next quarter were a little light, and yes, the company plans to spend more to build out its infrastructure. But as Motley Fool Money host Chris Hill and senior analysts Andy Cross, Ron Gross, and Jason Moser discuss in this segment from the podcast, the e-commerce powerhouse is being run with the long term in mind.
They reflect on where AWS is headed, concerns about the future of online sales in India, Jeff Bezos' strategy, and the odd way that Apple's model and Amazon's are converging -- or trading places. And Moser -- counseling patience -- reminds us of the number that shareholders should focus on.
A full transcript follows the video.
This video was recorded on Feb. 1, 2019.
Chris Hill: The Web Services business grew 45%, but Wall Street seemed otherwise unimpressed with Amazon's fourth-quarter report. Shares falling a bit on Friday, Jason.
Jason Moser: Wall Street is very hard to please sometimes, Chris.
Ron Gross: A fickle bunch.
Moser: You see it time and time again. The reason I think Wall Street is proceeding with a little bit of caution, the important thing to remember with Amazon is the metric that ultimately matters for this business: simple top-line revenue. That's the fuel that really keeps this engine humming. From that perspective, the company is performing well. First-quarter projections for management were perhaps a little bit lighter than what Wall Street was expecting. When you have that, along with the fact that now we're expecting them to hit another stage of investing in the business to build out this infrastructure, it's understandable if there's a little bit of trepidation out there. But this is the same great business that we knew even a week ago.
Perhaps there are some concerns there in regard to India. They've been making a lot of investments there recently. But there were some changes to the e-commerce legislation there essentially tantamount to antitrust concerns that might make it a little bit more difficult for not only Amazon, but Flipkart as well, which is owned by Walmart.
All in all, though, it's still the same business, taking that same long-term approach. Amazon Web Services, as you mentioned, doing really well. Trailing-12-month sales now of almost $26 billion. Operating income for the quarter up 57%. It's really just a matter of, are you willing to take that patient long-term approach with this company? I recommend that you do. I know I am.
Gross: Yeah, and let's not forget, all those investments take a chunk out of the bottom line. While they're profitable to the tune of a few billion dollars, they could be significantly more profitable if they turn that investment spigot off. They choose to build for the future. I think that's a smart move. Bezos knows what he's doing. He's not really that concerned about quarterly profits, which I like. They could be more profitable if they wanted to be right now, but they're playing the long game.
Moser: It's interesting to see how Apple and Amazon are coming to this crossroads here. Apple's always done such a good job of making money from selling the devices. Now, they're trying to make money on us using those devices. Amazon's philosophy has always been, "We're going to make money from you using our devices, not really from buying the devices." We're seeing these two businesses hit a little bit of a different point of the strategy at this stage in their lives.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chris Hill owns shares of Amazon. Jason Moser owns shares of Amazon and AAPL. Ron Gross owns shares of Amazon and AAPL. The Motley Fool owns shares of and recommends Amazon and AAPL. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.