'Replacing The Irreplaceable': Amazon Analysts React To Bezos Departure, Earnings Beat

Amazon.com, Inc. AMZN shares ticked slightly lower on Wednesday after the company reported some impressive fourth-quarter earnings numbers.

Amazon reported adjusted earnings per share of $14.09 on $125.5 billion in revenue. Both numbers exceeded consensus analyst expectations of $7.23 and $119.7 billion, respectively. Revenue was up 43.5% from a year ago.

Despite the top- and bottom-line beats, the quarter wasn’t all positive for Amazon. Cloud computing revenue was up just 28% to $12.7 billion, missing analyst estimates of $12.8 billion. Physical retail sales, which include Whole Foods, dropped 8% on the quarter.

In addition, co-founder Jeff Bezos announced he is stepping down from his role as CEO and will be replaced by Amazon Web Services CEO Andy Jassy in the third quarter of 2021. Bezos will maintain his position as executive chairman.

See Also: Amazon, Microsoft 'Cloud Arms Race Hitting Another Gear' With Bezos Replacement

Firing On All Cylinders: Morgan Stanley analyst Brian Nowak said Amazon’s business is clearly still firing on all cylinders.

“We continue to believe Consensus estimates are under-estimating the scalability of AMZN’s model and expected upward profit revisions even if you assume a large fulfillment/logistics build (which we have incorporated into the model) and material top-line deceleration starting in 2Q:20 (which is looking increasingly pragmatic),” Nowak wrote in a note.

Raymond James analyst Aaron Kessler said e-commerce sales momentum, cloud dominance, a growing advertising business and an improving margin profile is a winning recipe for investors.

“Amazon delivered strong 4Q results driven by upside in core retail areas including Online Stores, 3P Seller Services, and robust Advertising revenue growth,” Kessler wrote.

CFRA analyst Tuna Amobi said Amazon’s COVID-19 driven momentum is still going strong heading into 2021.

“AMZN's better-than-expected Q4 '20 and Q1 '21 guidance underscore accelerated shifts in global e-commerce and cloud computing on Covid-19 demand tailwinds,” Amobi wrote.

Transition Of Power: Needham analyst Laura Martin said Amazon will be “replacing the irreplaceable” when Bezos departs, but the company is in good hands with Jassy.

“We expect this structure to be positive for shareholders, as we think Jassy will be less likely than Bezos to make huge risky bets, plus Bezos on the Board represents a safety net if something goes wrong,” Martin wrote.

KeyBanc analyst Edward Yruma said Bezos will now be free to focus on longer-term initiatives as executive chairman.

“We believe that many of the processes and culture surrounding innovation and long-term investments will remain under CEO-designate Andy Jassy, which are even more critical given the scale of the business,” Yruma wrote.

AMZN Ratings And Price Targets:

• Morgan Stanley has an Overweight rating and $4,200 target.
• Raymond James has an Outperform rating and $4,000 target.
• Needham has a Buy rating and $3,700 target.
• KeyBanc has an Overweight rating and $3,700 target.
• CFRA has a Buy rating and $3,800 target.

Amazon's stock traded around $3,369.89 at publication time.