Amazon.com Inc. (NASDAQ:AMZN) has been losing ground in the extended hours, despite the fact that it recorded an impressive revenue increase and outstanding performance in its Q4 fiscal quarter.
The company’s revenue was $213.39 Billion, which is well above the expected $211.33 Billion.
A razor-thin missed on earnings per shares (EPS) as well as a staggering capex forecast wiped out billions of its market capitalization late Thursday.
The earnings announcement provided ample reason for investors who are looking to hold Amazon’s stock long term to increase or maintain their position on the dip that follows the release of the results, particularly now that the price is down about 20% from its 52-week peak.
Selling Amazon shares is not justified by massive capital expenditure
AMZN’s stock fell after hours mainly because the executives stated that capital expenditures would be $200 billion in this year. This is more than $50 billion above analysts’ expectations.
Although the sticker shock of such an enormous number may be intimidating, long-term investment should not view it as drain but rather as a protective moat.
CEO Andy Jassy is clearly signaling that the generative AI revolution is a “once-in-a-generation” opportunity that requires immediate, heavy lifting in data centre infrastructure.
Amazon’s history shows that it is only when they spend big, whether for Prime Shipping or AWS in its early days, will the company gain a dominant position and generate high margins.
It’s not a reckless expenditure of money; this is the building of the digital infrastructure for the coming decade.
It’s not as if the investment isn’t already paying off.
Amazon Web Services’ (AWS) Q4 revenue was $35.58 Billion, even exceeding the growth rate of 23% that analysts had predicted would be required to satisfy investors.
The capex guideline is not a reckless expenditure of money; rather, it’s a construction of ‘the digital backbone’ for the coming decade.
AMZN’s EPS is not important for the stock price
Investors who are savvy know that Amazon’s trajectory over the long term is determined by AWS.
Mark Shmulik, senior analyst at Bernstein, said that AWS has a distinct advantage over its competitors.
Amazon has the ability to add more cloud computing capacity in the next two years than its biggest rivals. This creates an advantage for long-term growth with long-standing, deep relationships throughout the supply chain.
Bernstein’s $300 price target for Amazon stock indicates a potential 50% upside from this point.
What is the best way to invest in Amazon.com Inc. after its Q4 results?
The bull case for AMZN remains intact despite the recent headlines.
AWS did not just exceed expectations, but it also accelerated to $35.6 billion. This shows that AI and enterprise cloud migration are driving a second wind in the sector.
The advertising industry continues to dominate the digital marketing space, with a staggering $21.32 Billion in revenue.
Investors are getting an AI-powered retail giant and world-class AI at a discounted price.
Amazon’s “dip” looks like an opportunity to those who have a longer-term outlook. It is less of a knife falling and more of a spring loaded opportunity.
The post Amazon Stock Sinks Despite AWS Beat in Q4: Should you Buy the Dip? The ICD published the original article, Amazon stock sinks despite AWS beating in Q4: should you buy on dip?
